ANNUAL REPORT & ACCOUNTS 2020
forward
contents
OVERVIEW
Chairman’s Statement
CEO’s Statement
Company Overview
OPERATIONAL REVIEW
Yanfolila Gold Mine
Reserves and Resources
Business Development
Responsible Mining
Environment
Financial Review
Strategic Review
GOVERNANCE
Corporate Governance
Audit Committee Report
Remuneration Committee Report
Board of Directors
Directors’ Report
Directors’ Responsibilities Statement
FINANCIAL STATEMENTS
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Cash Flows
Company Statement of Changes in Equity
Notes to the Company Financial Statements
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1
ANNUAL REPORT + ACCOUNTS 2020 our strategy
At Hummingbird we aim to produce gold
profitably, build on our medium to long term
growth initiatives, whilst maintaining focus
on operating responsibly through strict
Environmental, Social and Governance
(“ESG”) standards and respect for our
stakeholders. Further, our vision is to
become a multi asset, multi jurisdiction
gold producer that has diversification of
projects, while maintaining and continually
improving on our technical expertise, both in
exploration and operationally, to support the
growth of the Company for the longer term.
2
2
HUMMINGBIRD RESOURCES
HUMMINGBIRD RESOURCES our strategy
our principles
HUMMINGBIRD FIRST
Pride and value in Hummingbird
Company-centric thinking and working
Promoting our success and values, internally and externally
FORWARD
Focus on core strategic priorities and common goals
Delivering with urgency and agility
Providing solutions to drive outcomes and progress
CARE
Thinking about others and the environment we operate in
Providing regular mutual support and feedback to help us be the best we can
Recognising and rewarding success together
SMARTER
Clear accountability and performance expectations
Empowered teams, making timely fact-based decisions
Utilising collaborative processes, tools and technology
ANNUAL REPORT + ACCOUNTS 2020
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3
ANNUAL REPORT + ACCOUNTS 2020 focus and priorities
GROWTH
As a priority, we are focussed on
Our next development project, the
maximising the value from our current
Kouroussa Gold Project, Guinea
portfolio while continuing to evaluate
(“Kouroussa, Guinea”), purchased in 2020,
M&A opportunities for the long term.
once in production is expected to double
One of 2020’s key priorities was to
improve the Life of Mine (“LOM”)
prospects at the Yanfolila mine in Mali
with the success of the years drilling
results achieving this outcome, leading
to a decision to double the exploration
budget at Yanfolila for 2021 to further
that success.
the Company’s production profile, adding
circa 100,000 oz of gold production per
annum. Further, the Dugbe Gold Project in
Liberia (“Dugbe, Liberia”), being developed
by earn-in partner Pasofino Gold Ltd
(“Pasofino”), has the potential to have
material growth and value for shareholders
as Pasofino continues to deliver a
Definitive Feasibility Study (“DFS”) and
exploration programme in 2021.
CONTINUALLY EXPLORING
AND EXTENDING
4
HUMMINGBIRD RESOURCES AT THE CORE OF HOW WE OPERATE
ARE OUR ENVIRONMENTAL, SOCIAL
AND GOVERNANCE POLICIES
SOCIALLY AND ENVIRONMENTALLY RESPONSIBLE
At the core of how we operate are our ESG policies and management systems.
Our employees both corporately and on site are responsible for maintaining these
standards. We strive to maintain and improve upon industry best practices and having
joined the World Gold Council (“WGC”) during 2020 we are working to adhere to and
implement the WGC Responsible Gold Mining Principles (“RGMPs”).
ENTREPRENEURIAL AND EXPERIENCED
Focus on maintaining and continually improving on our expertise, from the board room
down, to support the growth of the Company for the longer term. Further, an ongoing
commitment to remain entrepreneurial in how we conduct our business to create
shareholder value and value for all stake holders.
EXPLORATION
Our strategy is to continually look at
exploring, extending, and maximising
the value of the Group’s resource base.
We are looking to maintain our 2020
exploration success into 2021 at the
Yanfolila mine in Mali with the doubling
of the exploration budget. Further,
exploration planning at Kouroussa,
Guinea began in 2020, in conjunction
with our overall pre-development
plans for the project. We believe
there is material upside to the current
1.18Mozs of indicated and inferred
gold resources at the project at
known and other targeted deposits.
Further, Dugbe, Liberia already has
a material gold mineral resource and
with Pasofino in place to add to the
historical +75,000 metres of drilling
already completed by Hummingbird,
we remain confident that the Project’s
value and prospects will be materially
improved during 2021.
5
ANNUAL REPORT + ACCOUNTS 2020 OVERVIEW
chairman’s statement
2020 was a year of significant challenges
for us all – whether as individuals or
companies, we have all had to adapt to
a period of continuing uncertainty and
stress caused by COVID-19.
RUSSELL KING
Non-Executive Chairman
Whilst, unfortunately, unlike last year,
Not only has COVID-19 affected our
we have not been able to maintain
people it has also reduced the efficiency
the production improvements in the
of our supply chain, our ability to access
Company’s operational performance this
external expertise at the mine, and has
is certainly not through want of effort,
prevented the sort of face-to-face contact
commitment, or focus. In particular, I
between the mine and our support
would like to acknowledge the huge
staff that is vital for effective operations.
personal sacrifices that our operational
Despite all these challenges, the Board
staff have made in keeping Yanfolila
is pleased that operations continued and
operating safely, and the local villages the
pleasingly we also advanced our strategic
Company supported during this period.
growth objectives in Liberia through our
It is of particular note, that many of our
earn-in agreement with Pasofino and in
expatriate and local staff were, due to
Guinea with the acquisition of Kouroussa.
governmental COVID-19 restrictions,
unable to leave the site for a prolonged
period causing stress to them and their
families. Yanfolila continuing to operate
safely and with community support during
these exceptional times is a significant
achievement and one for which we should
all be appreciative.
6
HUMMINGBIRD RESOURCES OUR OPERATIONS
CONTINUED DESPITE
THE CHALLENGES
ESG continues to be a significant focus
I would like to thank all our shareholders
for the Company. We are now over two
who have been there through our
million hours worked injury free, and
evolution from gold explorer to gold
our COVID-19 protocols on site and in
producer and remained committed
the local community have contributed
through the challenging times. Even
significantly to mitigating COVID-19
though this year has been exceptionally
cases, spread and adverse health related
challenging, I do hope that you are able to
issues. Although COVID-19 impacted
recognise that the Company has achieved
our community team’s ability to interact
much especially in taking steps to position
with our local communities as normal,
itself strategically for a brighter future.
community project initiatives continued
with the likes of ongoing success at our
market gardens, soap manufacturing
programmes, training, malaria spraying
initiatives and water infrastructure
improvements amongst others. This
year we have enhanced our focus on the
adoption of industry best practices. To this
end we have now joined the WGC and
are now working to implement the WGC
RGMPs.
7
ANNUAL REPORT + ACCOUNTS 2020 OVERVIEW
ceo’s statement
DAN BETTS
Chief Executive Officer
8
2020 was an extraordinary year by any measure
with the COVID-19 pandemic dominating affairs
around the world. Virtually no person or business
was immune to the impact in some form or
another, and our business was no different.
The challenges presented by COVID-19
We also set ourselves the target of
were multiple, and not always predictable.
enhancing the growth pipeline for the
By and large they affected logistics and
Company and advancing Dugbe, Liberia
“the human teams” element of the Company
in order to recognise value from the
the most. Whilst on one hand video
asset for shareholders. Again, both of
conferencing has provided us all with a
these objectives were achieved with the
very functional method of interaction,
acquisition of Kouroussa, Guinea and
I personally believe it is a poor substitute for
the signing of an earn-in agreement with
face time and the chemistry which bonds
Pasofino to advance and fund Dugbe,
a team and forms the culture of a company.
Liberia to feasibility study.
At our Yanfolila mine in Mali we endured
As a result, Hummingbird has a
extended periods of border closures
strengthened balance sheet, has an
(induced by the additional complication of
improved mine life outlook at Yanfolila and
an in-country coup as well as COVID-19
both a high-grade development asset at
restrictions) which impacted the movement
Kouroussa, Guinea and the development
of people and goods to supply the mine,
of a large-scale project in Liberia towards
and resulted in some changes being
a feasibility study which could showcase
necessary to the mine plan in order to
a meaningful Net Present Value (“NPV”)
preserve equipment from a maintenance
on a multi-million-ounce gold deposit.
perspective. Despite 2020 proving a
challenging year, and not meeting forecast
production expectations as set at the start
of the year, we are proud that the Company
continued to operate during difficult
circumstances without significant downtime
and continued to pay down circa US$30
million of debt to end the year in a net cash
position.
At the start of 2020, achieving a
strengthening balance sheet and net cash
position during the year was one of the
Company’s key objectives. Additionally,
we set out to conduct a more systematic
exploration programme at Yanfolila in
order to prove further mine life extensions
and improve confidence in our known
resources. The exploration programme
achieved both of these objectives with
particularly exciting results coming from
the Sanioumale East (“SE”) deposit.
The health and safety record at Yanfolila
has been exemplary with the Company
passing one year with no Lost Time Injury
(“LTI”). This is a fantastic achievement
as we develop into a seasoned mining
company and puts us into the first rank
of industry performance.
However, these achievements and
the strong position Hummingbird now
finds itself in, with the ability to show
strong internal growth, has been
largely overshadowed by the higher
costs and lower than expected gold
production at Yanfolila in 2020. As
explained above this was in part due
to the COVID-19 induced challenges
encountered during the course of the
year. The mine plan was changed in order
to process more oxide material in order
to prevent wear and tear on equipment.
HUMMINGBIRD RESOURCES In Q3 a coup in Mali impacted logistics,
in particular due to border closures and
extreme weather events added further
complexities to those already being
felt from COVID-19 impacting both our
production and cost forecasts for the year.
In terms of investing in senior personnel
for the future, the Company invested in
adding to the senior management team
with the appointment of a Chief Strategy
and ESG Officer, a new General Manager
at Yanfolila and in 2021 a new Chief
Operating Officer amongst others as
the Company positions itself to become
2021 OUTLOOK
During 2021 our primary focus will be to ensure that the operations at Yanfolila are
stabilised and output is more predictable. Our guidance for the year is 100,000 to
110,000 oz of gold, with an All in Sustaining Cash Cost (“AISC”) of US$1,250 to 1,350
per oz of gold sold. We are at the high-cost part of the LOM plan, and there are a
number of initiatives in place that are being further developed in order to improve
efficiencies and reduce cost across the operation.
The Company has also doubled its exploration budget at Yanfolila up to US$10 million,
in order to build on the 2020 drilling success. The intention of this programme is to
discover more ounces to extend the mine life at Yanfolila. We see the perceived short
mine life at Yanfolila as a major hindrance on our valuation, and attention in this area
can deliver material results which we have started to see in our 2020 drilling results.
We expect more success in 2021 given our increased budget spend in this area.
a multi-asset, multi-jurisdiction gold
Additionally in 2021, a major focus for the Group will be the advancement of
producer.
Kouroussa, Guinea. This is a major growth project for the Company and will see Group
Another Company initiative further
advanced in 2020, being the development
of the Single Mine Origin (“SMO”). The aim
is to be recognised as a thought-leader
in the market of responsibly sourced
metal, and through our strategic partner,
Betts Metals Ltd, we have the ability to
segregate metal all the way through the
refining and manufacturing process, into
production rise materially once in production to +200,000 oz per annum as well as
delivering diversification advantages as we become a multi-asset, multi-jurisdiction
gold producer. Now that the mining licence has been granted, by the Government of
Guinea, we are in the process of finalising the capital cost estimates with an eye to
approving, financing and commencing construction of the project in the second half
of 2021. In our planning process we are looking to incorporate leading ESG practices,
strategies, and processes at Kouroussa, Guinea to build a mine that is not only
compliant of leading industry practices but forward thinking in terms of how we care
for the environment, communities, employees, and key stakeholders in the region.
the jewellery that retail consumers buy.
Further, at Dugbe, Liberia, our earn-in partners, Pasofino, made significant progress in
The purchaser is provided with a unique
2020 in terms of taking the project forward to delivering a DFS by the end of 2021 on their
QR code which details which responsible
mine that metal was sourced from and
what environmental and community
initiatives are conducted at that site
in order to improve the livelihoods of
the local people and the surrounding
environment. All SMO mines will need to
conform to a world assurance standard
(like the WGC RGMP’s for example)
in order to receive accreditation and
current estimates and we look forward to their continued progress throughout the year.
Finally, but importantly, we look forward to enhancing our overall ESG initiatives at
Yanfolila, furthering our Environmental and Social Impact Assessment (“ESIA”) studies
at Kouroussa and progressing ESG management procedures for the project, as well as
with our earn-in partners Pasofino at Dugbe leading an ESIA process. Additionally, we
are excited about the prospects of SMO, as highlighted above, and seeing more global
mines join the platform.
Above all else, as the restrictions placed upon us ease, we will strive to build a
company that as shareholders, owners, employees and stakeholders alike, we can all
as a retail-led initiative, we believe it
be proud of.
will become an industry leading way
to showcase the important work that
the mining industry does in positively
contributing in the areas where they
operate that is fully traceable. Lastly of
note, during 2020 the Company became
a member of the WGC which we believe
is an important statement of our ambitions
to adhere to a high level of operational
and responsible mining practices, but also
important in our future growth ambitions.
TOTAL BANK DEBT AND NET DEBT OR CASH $US MILLION
60
50
40
30
20
10
0
T
B
E
D
T
E
N
H
S
A
C
T
E
N
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
TOTAL BANK DEBT
NET DEBT* OR CASH
NET CASH ~US$2MILLION
*Net-cash including the value of gold inventory as at 31.12.2020
9
ANNUAL REPORT + ACCOUNTS 2020
OVERVIEW
company overview
MULTI-ASSET
GOLD PRODUCER, DEVELOPER, EXPLORER
Total group resources inventory of +7 million oz of gold
Two core gold projects in Mali and Guinea, and a development project in Liberia
STRONG AND
STRENGTHENING
BALANCE SHEET
■
■
Total bank debt of ~US$13 million at the end of 2020 with
~ US$30 million capital repaid in the year
Material deleveraging in 2020 and forecasting to have repaid all
current bank debt by 1H 2021
EXPLORATION SUCCESS
US$5 million exploration spent, drilling
HEALTH AND SAFETY
A significant milestone was achieved in
+21,000 metres, achieving overall
September 2020 when the Yanfolila site
successful drilling results in particular
surpassed over 1 million free hours of
from three key future deposits.
LTI and closed the year with 1,780,200
Sanioumale East (“SE”) and the
LTI free hours.
Sanioumale West (“SW”) deposit drill
Rapid protocol procedures relating
results confirming resource growth
to COVID-19 virus spread mitigation
potential, while firming up the possibility
were successful both on site and in the
for underground mining at the Komana
surrounding villages via hand washing
East Underground (“KEUG”) deposit.
programmes, onsite rapid PCR testing,
social distancing, mask wearing and
training and awareness programmes
(which all are ongoing).
10
HUMMINGBIRD RESOURCES KOUROUSSA GOLD
PROJECT, GUINEA
To achieve our goal of becoming a multi
asset gold producer, we acquired the
Kouroussa Gold Project in Guinea in Q3
2020 for an initial consideration of £10m to
be satisfied through the issue of 35,248,441
shares in the Company.
Pre-development plans advanced while
awaiting the awarding of the mining
licenses from the Guinea government
which were granted May 2021.
ESIA study, Front End Engineering Design
(“FEED”), Infrastructure layout, sterilisation
drilling and overall mine planning
advancement in progress.
DUGBE, LIBERIA
Entered into an earn in agreement with
Pasofino to carry out and fund DFS and
exploration programmes.
Camp infrastructure, roads, bridges
and ESIA studies development begun
in preparation for DFS and exploration
progress in 2021.
KOUROUSSA
DUGBE
YANFOLILA
PRODUCING THROUGH
ADVERSITY IN 2020
Production and AISC were impacted
during the year mainly due to
COVID-19, military coup in Mali
impacting boarder closures and
adverse weather conditions in Q3,
however production continued
despite these challenges.
101,069 ounces (“oz”) full year
production and 104,174 oz sold at
AISC of US$1,147 per oz.
Generated revenues of US$182 million,
with additional US$3 million revenue
generated from sale of SMO gold.
2020 EBITDA of US$75 million (vs
US$55 million 2019).
ENVIRONMENTAL, SOCIAL AND GOVERNANCE “ESG”
COVID-19 impacted ability to interact with
local communities, however we successfully
supported, provided equipment and testing
to communities on the virus during 2020.
■
■
■
■
■
Over US$150,000 of COVID-19 support to governments and communities,
with +3,000 PCR COVID-19 tests carried out on our sites and at local villages
Malaria Indoor Residual Spraying (“IRS”) project was a success at Yanfolila,
and the two villages sprayed have seen significant reduction in reported cases
Reforestation programme commenced, planting +8,000 trees over 20 hectares
Continued success of eight market gardens around Yanfolila, providing livelihoods
for +675 people, mainly women who are employed full time
Adoption and advancement in terms of adherence of the WGC RGMP with a
detailed Company GAP analysis initiated and an independent assurance report
issued confirming Hummingbird’s conformance with the RGMPs’ year one
requirements. Full conformance targeted in 2022.
11
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
yanfolila gold mine
2020 was a challenging operational year
in Mali based on a culmination of factors
leading to an overall level of production lower
than the year guidance expectations given at
the start of 2020 and a higher cost profile.
FULL YEAR RESULTS
Gold poured (Ounces)
Ore mined (Tonnes)
Ore processed (Tonnes)
Average grade mill feed (g/t)
Recovery (%)
Gold sales (Ounces)
AISC (US$/oz)
Average gold sale price (US$/oz)
2020
101,069
1,431,293
1,388,641
2.41
94.08
104,174
1,147
1,745
2019
The emergence of COVID-19 virus in
115,649
1,733,870
1,253,658
2.88
93.48
February 2020 led to supply chain and
logistical pressures for goods and services
and people in general throughout the year.
However, positively our health and safety
measures were rapidly developed and put
112,686
into place which meant virus cases were able
986
1,377
to be controlled, with no COVID-19 related
deaths or severe health cases emerging
101,069
OZ OF
GOLD
POURED
101,069 oz of gold poured in FY2020 at an AISC on gold sold of
US$1,147 per oz, with production in particular impacted during the
year by COVID-19, border closures by way of sanctions by ECOWAS
against the military-led coup in Mali and extreme weather leading to a
below production guidance range being delivered
GUIDANCE FOR 2021
OF 100,000 – 110,000 OZ OF GOLD SOLD
AT AISC OF US$1,230 – US$1,350 PER OZ
12
due to the virus reported for the year. In Q3
2020, the Company faced several events
which impacted both costs and production.
This included extreme weather, where in Q3
we saw the wettest rainy season on record
impacting production with the continued
mining of oxides and waste that were of
lower grade than the Company’s start-of-
year plans particularly from the Komana East
(“KE”) mining pit. Further, as the rainy season
ended, a military coup in Mali occurred,
which saw enforced border closures by
surrounding countries for approximately a
month to compound the already complicated
COVID-19 induced logistical complications
the Company had faced.
However, despite these operational
challenges, no significant unscheduled
down time in production occurred during
the year. Further, the resilience of our
team was evident with some personnel
spending +6 months on site when normally
on rotating shifts due to COVID-19 travel
restrictions. This led to Hummingbird
producing 101,069 oz, a notable
achievement considering these challenges.
HUMMINGBIRD RESOURCES KOMANA EAST DEPOSIT
Long section view showing 2020 and
expected 2021 underground drilling
and mine design
2020 EXPLORATION AND DEVELOPMENT HIGHLIGHTS
The Company’s 2020 Exploration
Programme was focused on the following:
Komana East Underground: Underground mine potential confirmed under current
operating pit KE
At the KEUG deposit, sitting under our existing KE open pit, over 4,535 metres (“m”)
were drilled from 14 holes in 2020. The result of this drilling highlighted the continuity of
mineralisation plunging northwards at depth beneath the current operating pit and the
presence of high grades to feasibly support underground mining at Yanfolila.
The results of hole KEUGDD014 (3.5 m at 5.41 grammes per tonne (“g/t”) gold (“Au”)),
in the northern end of the open pit showed that mineralisation is still open in that direction,
increasing the potential for further resource growth northwards.
Further drilling is being carried out at the KEUG deposit in 2021 to firm up the geology with
the objective of bringing an underground mine into the life of mine plan.
ANNUAL REPORT + ACCOUNTS 2020
13
13
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
Sanioumale West: 2020 results improved
Sanioumale East: Open pit with
Greenfield targets
confidence in the mineral resource
underground potential
The SW open pit deposit, located to
The SE deposit was a key focus area
Reconnaissance drilling on high priority
the north of the process plant, saw over
for our 2020 exploration and drilling
targets both within the mining license
13,000 m drilled as part of the infill and
campaign. The objective of 2020 drilling
and the adjacent Diaban exploration
resource expansion programme for the
at SE was to improve the confidence of
license will continue to be targeted
deposit. The results have been positive
the known mineral resources, test the
during 2021.
in conforming improved confidence
continuity of mineralisation into the fresh
in the mineral resource grade, overall
rock as only oxide and transitional material
geology and further extending the
had been drilled and reported previously.
known depths of mineralisation below
the current shallow pit design.
The results of our SE drilling achieved
some notable drill hole intersections,
with SE a key focus area for our 2021
drilling campaign. Further, ESIA studies
were initiated at the SE deposit, since
this was not covered in our initial ESIA
study assessments and plans for village
resettlement in the area initiated that will
be required.
YANFOLILA MINE
Komana, Mali
14
HUMMINGBIRD RESOURCES
reserves and resources
In March 2021 Hummingbird announced the following updated
Mineral Resource table for Yanfolila (effective date 31 December 2020).
2020 YANFOLILA MINERAL RESOURCES TABLE*
AS AT 31 DECEMBER 2020
INDICATED
INFERRED
TOTAL RESOURCES
DEPOSIT
Komana East
Komana West
Gonka
Sanioumale East
Sanioumale West
Guirin West
Kabaya South
Kabaya South**
Badogo-Malikila**
TONNES
(kt)
4,177
5,877
2,003
1,669
1,739
1,160
1,370
GRADE
(g/t)
OUNCES
(koz)
3.61
2.07
3.39
2.64
1.85
1.98
1.42
485
390
219
142
104
74
62
Mineral
Resource Code
JORC
JORC
JORC
JORC
JORC
JORC
SAMREC
Non-Code
Non-Code
TONNES
(kt)
813
1,006
295
754
1,067
-
650
950
2,347
GRADE
(g/t)
OUNCES
(koz)
2.90
1.57
7.82
2.58
1.76
-
1.10
1.50
0.81
76
51
74
62
61
-
23
46
61
TONNES
(kt)
4,990
6,883
2,298
2,423
2,806
1,160
2,020
950
2,347
Total Mineral Resources
17,995
2.55
1,475
7,882
1.79
454
25,877
GRADE
(g/t)
3.49
1.99
3.96
2.62
1.82
1.98
1.31
1.50
0.81
2.32
OUNCES
(koz)
561
441
293
204
164
74
85
46
61
1,929
* The mineral resources shown in the table above represent the gross resources attributable to the Project (inclusive of Government interest).
** Where the Inferred resources from Kabaya South and Badogo-Malikila are reported, it is noted these are Gold Fields Ltd historical mineral resources as previously reported in the
Company's MRE update of December 2015.
RECONCILIATION OF MARCH 2019 AND DECEMBER 2020 MRE
MARCH 2019 TO
DECEMBER 2020 MRE
CHANGES TABLE
(Ounces kozs)
March 2019 MRE
2020 Discovered Resources
(12 months)
Mined Resources Depletion
(21 months)
Non-Code /
Geological Model
Change
MRE Adjustments
December 2020
MRE
2,003
+255
-258
-114
+43
1,929
EXPLORATION & DEPLETION
15
ANNUAL REPORT + ACCOUNTS 2020
OPERATIONAL REVIEW
business development
In 2020, we continued to progress on important growth
opportunities to continue to help create our vision of being a multi
asset, multi jurisdiction gold producing company while continuing to
focus on extending the Life of Mine (“LOM”) potential, in particular:
KOUROUSSA GOLD
PROJECT, GUINEA
2020 was an important year for the
Company setting itself up for future
growth. In June the Company announced
the signing of a conditional binding Sale
and Purchase Agreement confirming and
setting out the key terms for the acquisition
of Kouroussa, Guinea, from Cassidy Gold
Corp (“Cassidy”) with the acquisition
completed in September 2020. This
strategic acquisition, once in production,
will see the Company’s production rise
materially to +200,000 oz per annum, with
material upside exploration potential, with
a current mineral resource of inferred and
indicated resources of 1.18 million oz
of gold at >3g/t. Pre-development
works began with a dedicated project
management team assigned. Detailed
process plant, flow sheet, infrastructure,
and FEED analysis began. Capital cost
estimates for equipment, construction and
major contracts were initiated, along with a
sterilisation drilling programme to confirm
plant layout as well as exploration planning.
KOUROUSSA GOLD PROJECT
Mining licenses map
16
HUMMINGBIRD RESOURCES business development
DUGBE, LIBERIA
License area and exploration targets
THE DUGBE GOLD PROJECT, LIBERIA
Similarly, in June 2020, the Company announced an earn-in agreement in respect of
Dugbe, Liberia, with ARX Resources Limited (“ARX”). ARX was subsequently acquired by
Pasofino who have the option to earn a 49% economic interest (prior to the issuance of the
Government of Liberia’s 10% carried interest) in Dugbe, Liberia once a DFS is completed
while covering all Dugbe project costs over that period. Bringing in an earn-in partner to
progress the project with separately committed capital and management time is expected
to unlock Dugbe’s latent value.
Pasofino have made material progress during 2020 at Dugbe. Management and
operational teams were assembled in mid-2020 with project budget and work programmes
devised and begun. Initial focus related to improving infrastructure including camp
improvements, road repairs and bridge builds. ESIA studies began along with exploration
and mineral resources work programmes in November 2020.
Exploration and drilling programmes begun in late 2020, starting at the Tiehnpo exploration
target area with infill drilling at the Dugbe F deposit and resource infill and expansion drilling
at Tuzon planned in early 2021 (which have subsequently occurred).
DRA Global were selected as lead consultants for the DFS. Trade-off studies evaluating
power and infrastructure options were initiated with metallurgical flowsheet being reviewed
and mining options evaluated.
17
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
responsible mining
2020 was a year dominated by COVID-19 for many of our ESG
programmes. When the first global cases started to emerge in
February 2020, the Company was quick to initiate health and safety
protocols for our employees, contractors and local communities.
We are proud of the way in which our employees adapted to the
challenges COVID-19 placed not only on the business in general
but also on individuals.
18
18
HUMMINGBIRD RESOURCES
HUMMINGBIRD RESOURCES responsible mining
BOUGOUDALE
The market garden, now part
of a functioning business.
Community and site Water, Sanitation
The challenge of Artisanal and Small-scale
and Health (“WASH”), training and medical
Mining (“ASM”) remained in 2020, with a
procedures were initiated, coupled with
rising gold price in general seeing rising
strict quarantine procedures and testing.
ASM numbers amongst our peers for
These initiatives meant the Company was
the year. Further, COVID-19 restrictions
able to control the spread of COVID-19 with
impacted the Company’s plans to better
no lasting or severe health impairments or
engage with local communities and the
deaths reported during the period.
government in general on this issue.
COVID-19 did however impact the
Company’s health, safety, environmental
and community teams’ ability to interact
with local communities as normal. Despite
these challenges, we did see progress with
We are working with local and national
government to progress a potential
regulated ASM corridor in the region
as well as ways to enhance alternative
livelihood and eduction programmes.
our community project initiatives in Mali
The Company’s strong track record
at our locally supported market gardens,
on safety at site continued with a
poultry farms, soap manufacturing, honey
Total Recordable Injury Frequency
and education programmes. In the second
Rate (“TRIFR”) of 0.82 being recorded
half of 2020 a renewed focus was put on
compared to 2.82 in 2019. Ongoing
infrastructure improvements at existing
training, monthly safety awards and a
community projects such as water bore
daily focus at site on health and safety
holes and water tower improvements,
continues to deliver a strong track record
school infrastructure repairs, local healthcare
for the Company which we are proud of.
and poultry farm building improvements.
With infrastructure improvements made in
2020 a focus for 2021 is to enhance our
existing community projects, versus taking
on new initiatives, while endeavouring to
have our locally supported communities
take greater ownership and responsibility
for initiatives the Company has helped put
in place.
EDWARD MONTGOMERY
Chief Strategy & ESG Officer
At both Kouroussa, Guinea and Dugbe,
Liberia progress was made on ESIA
studies, which are ongoing and expected
to be completed for both projects in 2021.
As part of being a World Gold Council member, the Board committed to achieving
conformance with the WGC’s RGMPs and an internal working group was set up to initiate a
Company GAP analysis against RGMPs on current overall protocols and procedures in place.
In 2021 we expect to continue implementing procedures to begin to close those GAPs
identified, which we believe will further enhance our overall ESG performance.
Further, the Company has a ESG Committee, which includes an independent Chair, and second
independent adviser and the Chief Strategy and ESG Officer. The Company Chairman, the
Chief Executive, and the Finance Director are also invited to attend these meetings. It typically
meets once a month to review and advise the Company on its overall ESG performance.
Lastly, our commitment to operate responsibly with strict environmental, social and governance
protocols and practices integral to our overall business practices remains and is embedded
in the Hummingbird Values with a revised set of organisational principles and behaviours to
support our updated organisational structure as highlighted previously in our strategy section.
ANNUAL REPORT + ACCOUNTS 2020
19
19
ANNUAL REPORT + ACCOUNTS 2020
OPERATIONAL REVIEW
The below table is a summary of key performance indicators and
metrics relating to governance, our people; social performance and
environmental performance. Material factors have been informed
by the ESG Committee and selected stakeholders both internal
and external to Hummingbird in outlining our key target and focus
areas, with more detailed commentary following the table.
KEY TARGETS AND FOCUS AREA STATISTICS – YANFOLILA MINE MALI STATISTICS 1
TOPIC
TOPIC AND TARGET
UNIT OF MEASURE
2019 RESULT
2020 RESULT
GOVERNANCE
Certification
Implementation of
the WGC RGMPs
Qualitative
n/a
Year 1 –
readiness review
Year 2 – internal
assessment
Year 3 – third
party assurance
on compliance
The Hummingbird Board pledged to
implement the WGC RGMPs as the
organising framework for ESG issues.
Working group established to undertake
a GAP analysis between the RGMPs and
current policies and practices.
An independent limited assurance report
was issued by RSM Risk Assurance
Services LLP confirming Hummingbird’s
conformance with the RGMPs’ Year One
requirements
TREND
+ve
Anti-bribery and
corruption (“ABC”)
training
Number of
people
Human Rights
training
Number of
people trained
Total of 92 senior and those regarded
as high-risk employees were requested
to and completed training across the
Group.
+ve
100% of Malian national security forces
and private security contractors were
trained, which totalled 860 people
+ve
40 people
(100%) of
corporate
team
34 people
(15%) of Mali
team
890 people
trained,
including
Malian
national
security
forces and
private
security
contractors
1 These statistics relate largely to the Yanfolila mine in Mali. The Company will include more data on Kouroussa,
Guinea and Dugbe, Liberia in the 2021 annual report as those projects are further developed
20
HUMMINGBIRD RESOURCES TOPIC
TOPIC AND TARGET
UNIT OF MEASURE
2019 RESULT
2020 RESULT
TREND
OUR PEOPLE
Safety &
Health
No work-related
fatalities
Lost Time Injury
Frequency
Rate (“LTIFR”)
improvements
Total Recordable
Injury Frequency
Rate (“TRIFR”)
improvements
Malaria overall
incidence rate
reduction on site
Safety training –
Target of 11,400
hours
Human
Resources
95% National
employees
25% from
communities
directly impacted
by the operations
Develop a Diversity
Policy at site level,
highlighting any
restrictions on
gender diversity
Develop action
plan to improve
performance
Number
0
0 (Target met)
Per million hours
worked
1.25
0.29
Per million hours
worked
2.82
0.82
% of total
workforce
42%
incidence
14% incidence
Hours
% employees
(incl. contractor
companies)
% employee
(incl. contractor
companies)
11,419 hours
of safety
training
17,290 hours of safety training Improved
training of our contractors in particular
leading to the rise in safety training hours
95%
95%
27%
29%
+ve
+ve
+ve
+ve
+ve
Neutral
+ve
Qualitative
New for
2020
44 women on Yanfolila mine site (3%)
including contractors
Neutral
The Company continue to promote
diversity and inclusion in our corporate
policies, specifically during our recruitment
processes, in line with our adoption of
the RGMPs, most notably 6.5 (diversity)
and 6.6 (women and mining) with further
enhancements expected in 2021
21
ANNUAL REPORT + ACCOUNTS 2020
OPERATIONAL REVIEW
TOPIC
TOPIC AND TARGET
UNIT OF MEASURE
2019 RESULT
2020 RESULT
TREND
SOCIAL PERFORMANCE
Stakeholder
engagement:
Review grievance
mechanism in light
of stakeholder
feedback to ensure
good awareness,
accessibility and
responsiveness.
Local Procurement
and Supply Chain:
Review of local
procurement policy
and supply chain
to identify new
opportunities
Complete due
diligence for child
labour/modern slavery
in the supply chain
ASM formalisation
project advanced with
government support
and third-party
involvement
Livelihood Restoration
project spend
ASM
Qualitative:
number of
grievances
received
and level of
engagement
2 in 2019
3 in 2020
Neutral
Over 120 mass meetings were held
in local communities on general
stake holder initiatives, training,
and general engagement in order
to ensure ongoing awareness and
addressing of concerns in our
locally supported communities
Qualitative
New for 2020
GAP analysis initiated on current
protocols and procedures with the
WGC RGMP implementation
Neutral
Qualitative
New for 2020
-ve
Impacted by a change of
government in Mali during the year
and COVID-19 ability to interact
with local communities and miners
in general. Interactions at the
government level for overall ASM
risk mitigation measures were
increased in 2H 2020 and remains
a focus for 2021
US$/yr
US$180,000
US$43,539
-ve
Community
Investment and Health
US$/yr and
qualitative
US$352,000
A lower spend amount than
budgeted due to COVID-19
impacting our community team’s
ability to enter local communities
and conduct work programmes.
In 2021 we expect overall work
programmes to show improvement
as teams are able to engage more
with local communities
US$179,000 spent compared to
budgeted US$219,000, however
2021 budgets are increased to
offset lower 2020 spend. Despite a
lower spend the Company did see
material positive local community
work done on health, in particular
relating to COVID-19 testing,
training and awareness
Neutral /
+ve
Malaria programmes
in the local
communities via IRS
Qualitative
Postponed in
2019
IRS completed in the Bougoudale
and Tiemba villages at a cost of
~US$100,000, with support from
our partners
+ve
22
HUMMINGBIRD RESOURCES TOPIC
TOPIC AND TEST
UNIT OF MEASURE
2019 RESULT
2020 RESULT
TREND
ENVIRONMENT
Environmental
compliance
and Resource
efficiency
Process water recycling
- 85% target
Raw (fresh) water
efficiency of 0.50
% return water
75%
m3/tonne ore
0.49
78%
0.42
+ve
+ve
No major environmental
incidents
Number
No major
incidents
No major incidents
Neutral
ppm WAD CN
2.24ppm
1.56 ppm
+ve
Cyanide Detoxification
performance less than
50ppm Weak Acid
associable (WAD)
Cyanide (CN) in the
TSF 1
80% of waste materials
reused/recycled
% of material
recycled
80%
80%
Neutral
Climate
Change
Introduce a site wide
policy to reduce and
offset Greenhouse Gas
(“GHG”) emissions
Qualitative
New for 2020
GHG emissions
efficiency
tCO2e/AU oz
0.59 (0.59 in
2019)
Biodiversity &
Rehabilitation
We will implement
Biodiversity
Management Plans
(BMP) at all of our
Project sites
Qualitative
New for 2021
The Yanfolila site has a
comprehensive material
recycling programme in
place with local and national
accredited contractors
Ongoing review and
evaluation programmes
on energy efficiency are
taking place at Yanfolila,
with detailed reviews at
both development projects,
Kouroussa, Guinea and
Dugbe, Liberia
Neutral /
+ve
0.75
-ve
Rise from 2019 levels
since the processing of
harder ores required the
consumption of more energy
and more volumes mined
impacting overall GHG
emissions from the mobile
fleet. Initiatives are being
analysed at a Group level
on ways to improve overall
GHG emissions, in particular
at Kouroussa in Guinea as
stated above
Dugbe, Liberia BMP to be
updated during on-going
ESIA work by Pasofino
Kouroussa, Guinea BMP to
be finalized based on ESIA
work undertaken in 2020
Yanfolila ESIA to be reviewed
and develop standalone
BMP for the operation
n/a
20 hectares reforested
per year at Yanfolila
ha
0
20 hectares planted in 2020
(+8,000) trees
+ve
Looking to replicate in
2021 and develop a
local community nursery
programme to grow and
plant tree seedlings and
maintain reforestation
programmes
1 TSF point of compliance in pond
23
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
The WGC launched the RGMPs in September 2019, an overarching
framework that represent international best practices in exploration,
operation, and closure of gold mines. Responsible gold mining is
conducted with respect for the environment and the human rights,
safety and wellbeing of our employees, contractors and members
of the communities associated with our activities.
WORLD GOLD COUNCIL AND RESPONSIBLE
GOLD MINING PRINCIPLES
In September 2020, as part of our commitment to implement international best
practices, the Board of Hummingbird declared its intent to adopt the RGMPs as
an organising framework for the Company’s ESG strategy and to work towards full
conformance by the deadline of September 2022 and to report upon the assurance
process for this during the first half of 2022.
Hummingbird is carrying out a GAP analysis, under the guidance of our ESG Committee
of our policies, systems and performance against the standards set out in the principles of
the RGMPs to identify areas for improvement. In October 2020, the Company received the
report of our independent assurance provider, RSM Risk Management Services, detailing
our conformance with the year one requirements of the RGMPs. We expect to make
progress in 2021 in terms of closing internally identified Company GAPs to the RGMPs.
YANFOLILA LTIFR
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
JAN20
FEB20 MAR20 APR20 MAY20 JUN20
JUL20
AUG20 SEP20 OCT20 NOV20 DEC20
LTIFR 12 month rolling average
LTIFR 12 month target
YANFOLILA TRIFR
d
e
k
r
o
w
s
r
u
o
h
0
0
0
,
0
0
0
,
1
r
e
p
d
e
t
r
o
p
e
R
20
10
0
24
16.71
3.64
2.82
0.82
2017
2018
2019
2020
SAFETY
The Company’s strong track record
of on-site safety continued in 2020.
In 2020 we improved our LTIFR to
0.29, compared to 1.25 in 2019 at our
Yanfolila mine. We note in 2020 one
injury resulted in lost time for a total
of five days at Yanfolila.
In September 2020 a significant
milestone was achieved when the site
surpassed over one million LTI free hours
and closed the year with 1,780,200 LTI
free hours. Given our track record and
wanting to see further improvements,
the Company with our on-site team
decided to reduce the TRIFR target from
2.5 in 2020 to 1.2 in 2021 with the 2020
TRIFR decreasing from 2.82 to 0.82 for
2021. The on-site safety improvements
trends being recorded are achievements
of which the Company is very proud.
We remain committed to ongoing
training, proper procedural measures
and documentation in areas of key
importance to prevent future incidents
occurring.
HUMMINGBIRD RESOURCES
PROVIDING MEDICAL
EQUIPMENT AND
CONSUMABLES FOR THE
FIGHT AGAINST COVID-19
In relation to Yanfolila’s contractor base we continue to use many well-known international
groups for a range of services that have well recognised and accredited safety protocols
and management systems in place. All employees and contractors are required to
HEALTH AND COVID-19
2020 medical activities were dominated
complete Hummingbird’s safety training modules in hazard awareness, job safety analysis,
by the management of the COVID-19
basic fire response, first aid and chemicals awareness. Further, we continue to make use
pandemic. Such activities included: the
of smaller, and as much as possible local, contractors at site.
A particular focus for 2020 on health and safety revolved around COVID-19 prevention.
At Kouroussa we recorded one personal injury to a contracted security guard who fell into an
artisanal mining shaft whilst on duty. The patient was attended to by the Company’s emergency
response team and then evacuated to the local village of Kankan and onward to Bamako for
emergency surgery. The patient was monitored by Hummingbird’s medical consultant Critical
Care International (“CCI”) and has since recovered. Further, we report an accident involving
a company vehicle returning to site from Bamako tragically caused a fatality. All appropriate
protocols were followed to support the family and village by senior onsite management teams.
MAJOR ONSITE CONTRACTORS
NUMBER OF
PEOPLE ON SITE
RESPONSIBILITY
AMS *
Capital Drilling
Aggreko
SGS
Vivo
IMS
Wassa
CIS
Escort
558
Contract Mining
41
8
26
6
71
43
67
Drilling
Power provider
Laboratory services
Fuel
Mining support
Camp and catering
158
Security
Examples of Major Contractors working at Yanfolila. The Company will include more data on Kouroussa,
Guinea and Dugbe, Liberia in the 2021 annual report as those projects are further developed
* Now replaced by Junction Contract Mining (“JCM”)
Construction, TSF and roads
Further, the Yanfolila gold mine offered
education and awareness of the 1,300
workers of the mine; establishment of
an on-site quarantine protocol; and
installation of a P2 laboratory to allow
on-site PCR testing in partnership with
the Laboratoire National de Biologie
Appliquée (“LBMA”) being one of the four
accredited COVID-19 laboratories in Mali.
More than 3,000 PCR tests were carried
out, making it possible to diagnose 59
cases of COVID-19, including 33 on
camp, 16 among workers living in the
community, and 10 among workers
leaving Bamako to return to site after their
break. Cases were effectively managed
by our onsite medical team, with three
of these 59 deemed more serious and
referred to Bamako, by our internationally
recognised medical services contractor
CCI, working alongside our national
doctor and nurses. We note all patients
have fully recovered.
substantial support to the health
structures of Bougoudalé, Soloba and
Yanfolila, by providing them with medical
equipment and consumables for the fight
against COVID-19, including oxygen
concentrators and large cylinders of
medical oxygen. The mine also rented
local community accommodation as
an isolation unit for COVID-19 local
population patients, procured local soap
and masks from local entities and worked
with local leaders to monitor adverse
social and economic conditions arising
from the pandemic.
25
ANNUAL REPORT + ACCOUNTS 2020
OPERATIONAL REVIEW
Along with the management of the COVID-19 pandemic, the
clinic was busy conducting 2,359 consultations in total; of these,
1,815 were initial consultations (defined as a consultation for a new
health-related issue), and 544 review consultations. These include
follow-up appointments from initial consultations, chronic disease
reviews, appointments for patients returning to work following a
period of sickness and wound care appointments.
Malaria IRS was carried out twice at the
Yanfolila site camp, and once (in August
2020) in the villages of Bougoudalé and
Tiemba. This was the first time IRS was
carried out in the community, which
was well received by them. This activity
was done under the supervision of the
entomological unit of the LBMA and the
National Malaria Control Programme.
The cost was US$100,995 and provided
enhanced protection to about 9,085
people. Malaria incidence has significantly
reduced not only among mine workers
(12%), but also among the community in
the two villages sprayed. LBMA reported
that Malaria incidence was reduced by
70% in the population of Bougoudale and
Tiemba villages.
We thank our contractors and business
partners who supported these malaria
programmes in the communities.
Other healthcare related initiative
conducted during 2020 included:
mass worker HIV awareness and testing
campaigns; training of 83 first aiders;
training of 30 advanced first aiders to
manage potential cyanide poisoning
cases, and occupational health visits
(pre-employment medical visit, annual
medical visits).
26
CONSULTATIONS AND EMPLOYEES NUMBERS 2020
s
n
o
i
t
a
t
l
u
s
n
o
c
f
o
r
e
b
m
u
N
300
250
200
150
100
50
0
JAN
FEB MAR
APR MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Number of initial consultations Number of review consultations Number of employees
s
e
e
y
o
p
m
e
l
f
o
r
e
b
m
u
N
1800
1600
1400
1200
1000
800
600
400
200
0
HUMMINGBIRD RESOURCES
THE LOWEST INCIDENCE OF
MALARIA AMONG WORKERS
SINCE THE MINE OPENED
INCIDENCE OF MALARIA AMONG THE MINE WORKERS 2017–2020
0.160
0.140
0.120
0.100
0.080
0.060
0.040
0.020
0.000
2017
2018
2019
2020
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
The lowest incidence of malaria among workers since
the mine opened was registered in 2020 (12%).
MALARIA CASES AMONG THE POPULATION IN 2019 AND 2020 IN BOUGOUDALE AND TIEMBA
l
s
e
s
a
c
a
i
r
a
a
m
o
r
e
b
m
u
N
f
s
n
o
s
r
e
p
0
0
0
,
1
r
e
p
40
35
30
25
20
15
10
5
0
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
JANUARY
IRS
Cases 2019
Cases 2020
27
ANNUAL REPORT + ACCOUNTS 2020
OPERATIONAL REVIEW
PEOPLE ARE CENTRAL
TO OUR VISION OF
RESPONSIBLE MINING
OUR WORKFORCE
Involvement of local people with the presence of the mine is central to our vision
of responsible mining. Thus, local hiring and training remains a priority and
Hummingbird is pleased to report that 95% of all employees (including contractors)
are Malian nationals, and 27% of all Yanfolila employees (including contractors) are
from the local communities (total of 243 people at end 2020). In Liberia, Pasofino
employ 58 workers, 49 local and 9 expats. In Kouroussa, Guinea 222 people
were employed at the end of 2020 as taken over by Cassidy, with subsequent
restructuring of the Guinean work force completed in 2021 by the Company in
preparation for pre-development works at the Project.
Total average number of workforces is as follows:
CORPORATE
MALI
LIBERIA1
GUINEA2
TOTAL
EMPLOYEES
CONTRACTORS
20
234
58
222
534
1,209
1 Dugbe, Liberia workforce based on Pasofino numbers as at the end of 2020.
2 Guinea employee numbers on taking over the project from Cassidy
PAYMENTS TO
GOVERNMENT AND
LOCAL CONTENT
Hummingbird participates in the
Extractive Industries Transparency
Initiative (“EITI”) processes in
Mali, Guinea and Liberia. In 2020
Hummingbird paid a total of US$14.0
million to the Government of Mali
comprising taxes, duties and royalties,
an increase of almost US$1 million,
reflecting in particular higher royalty
payments. In addition to reporting in
line with UK disclosure requirements
we strongly support the in-country
EITI transparency processes in
stimulating continuing dialogue between
governments, business and civil society
and enhancing accountability around
the use of the countries’ resource
endowments.
In Liberia, Hummingbird paid US$331,000
in licence fees and taxes to the
Government of Liberia. Following the
acquisition of the Kouroussa project in
Guinea, Hummingbird paid US$200,000
to the Government of Guinea,
comprising taxes and duties.
28
HUMMINGBIRD RESOURCES
PAYMENTS TO GOVERNMENT OF MALI 2020
LIBERIA LOCAL PROCUREMENT 2020
2020
2019
XOF’000’000
US$’000
XOF’000’000
US$’000
In 2020, 54% of payments for goods and
services were made to national and local
suppliers, equating to over US$2,500,000
Payroll taxes
Social Security
Withholding tax - IBIC
Royalties - CPS Tax Payable
Customs and import fees
Gold export fees
Corporation tax/Minimum tax
Other taxes
Total
736
1,063
1,297
2,969
279
600
1,043
237
1,262
1,833
2,189
5,087
480
1,019
1,767
392
824
824
1,787
2,261
236
591
965
185
1,411
1,408
3,028
3,853
406
1,009
1,645
317
8,224
14,029
7,673
13,077
PAYMENTS TO GOVERNMENT OF GUINEA 2020
Following the acquisition of Cassidy, the Group has made the following payments to the
Government of Guinea.
1 SEPTEMBER TO 31 DECEMBER 2020
of payments.
VENDORS
Local Vendors (Dugbe
area)
National Vendors
International Vendors
Total
2020
US$ ‘000
283
2,308
2,182
4,773
GUINEA LOCAL PROCUREMENT 2020
Following the acquisition of Cassidy,
the Group made the following purchases
goods and services from Guinean
suppliers equating to 31% of all
purchases. The split of purchases still
GNF’000’000
US$’000
reflects the initial development phase of
the project and it is expected over time
local procurement will increase. The below
is from 1 September to 31 December 2020.
VENDORS
Local Vendors
(Kouroussa area)
National Vendors
International Vendors
Total
2020
US$ ‘000
459
421
1,921
2,801
Payroll taxes
Social Security
Withholding tax
Total
PAYMENTS TO GOVERNMENT OF LIBERIA 2020
Business registration fees
Licence fees
MDA signing bonus
Payroll taxes
Withholding tax
Total
MALI LOCAL PROCUREMENT 2020
587
478
884
1,949
2020
US$ ‘000
5
148
-
76
102
331
60
49
91
200
2019
US$ ‘000
5
165
1,500
10
67
1,747
In 2020, 84% of payments for goods and services were made to nationally registered
and local suppliers, equating to over US$85,000,000 of purchases.
VENDORS
Local Vendors (Yanfolila area)
National Vendors
International Vendors (16% of total
(2019: 19% of total)
2020
US$ ‘000
111
85,109
16,480
2019
US$ ‘000
341
90,879
21,948
Total
101,700
113,168
29
ANNUAL REPORT + ACCOUNTS 2020
OPERATIONAL REVIEW
environment
Our approach to the management of environmental and social
aspects across the Company’s sites involves the implementation
of the mitigation hierarchy to avoid, minimise, mitigate and
where appropriate, compensate for or restore identified effects.
Hummingbird’s Environmental teams continue to utilise the
environmental management system and implement a number
of management plans, many of which have been reviewed and
updated during the year. Over the course of the year, environmental
monitoring included air quality sampling, water quality sampling,
monthly noise monitoring and continuous particulate monitoring
and management of all solid waste. The specialised database set
up last year continues to allow us to analyse trends and understand
our impacts better, and therefore manage them better.
UNDERSTANDING AND
MANAGING OUR IMPACTS
30
30
HUMMINGBIRD RESOURCES
HUMMINGBIRD RESOURCES environment
WATER USE
MANAGEMENT OF WASTEWATER AND TAILINGS
Hummingbird utilises fresh water in mineral processing and extracts groundwater from the
dewatering of open pits as well as returning water from the TSF for use in the plant. While
abstractions of fresh water and quantities of groundwater pumped from the dewatering
network remained similar to the 2019 volumes, there has been a focus on increasing the
amount of water returned from the TSF in order to reduce the amounts abstracted from the
river. There has also been an increased focus on reducing the amount of water on the TSF
by the installation of a second evaporator in 2020, an increase in the amount of time that
the evaporators operate with additional evaporators ordered to be installed in 2021.
Overall, 78% of water used in the plant is recycled, water pumped from the river and
from boreholes has decreased, return water from the TSF has increased and total water
consumption is down by 7%. We also manage run-off from our facilities including the waste
rock dumps in order to ensure compliance with our permit. The TSF operates as a zero-
discharge facility. In 2020, no significant water quality impacts were recorded. We note a
moderate spill from the tailings pipeline from the plant to the site was recorded in Q1 2020
as a result of a bush fire damaging the pipe. The spill was contained on surface and did not
result in uncontrolled discharge to water courses or groundwater. The spilled materials were
cleaned up and deposited within the TSF. An additional five minor environmental incidents
were recorded through the year, all were of negligible impact and were remediated in a
timely fashion.
Lastly, we aim to continue to increase the percentage of water recycled in mineral processing
(largely from TSF reclaim) with an overall efficiency of freshwater usage of 0.49 cubic metres
per tonne of ore (in FY2019, the equivalent number was 0.64 cubic metres per tonne of ore).
TSF MONITORING
The TSF is independently audited quarterly by a chartered engineer. Inspections are
conducted to assess the tailings storage operations relative to established international
standards and practices. The inspections provide commentary on the condition of
the facility, identify any unusual conditions, highlight any areas of concern, review
monitoring data and provide suggestions and recommendations for any changes in
operating practices. Inspections entail a physical inspection of the facility and associated
infrastructure, a review of monitoring data and discussions with relevant site personnel.
In 2020 Hummingbird invested in management of the TSF water balance through
increased pumping, improved water recovery rates as well as completion of the Stage
2 and 3 downstream raises. A Stage 4 raise was completed in Q1 2021. A second
evaporator was commissioned in early Q1 2021. In addition, a third-party review of
the dam design, construction and operation has been initiated in line with the Global
Industry Standard on Tailings Management.
ANNUAL REPORT + ACCOUNTS 2020
31
31
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
GREENHOUSE GAS EMISSIONS AND CLIMATE CHANGE
We continue to measure our carbon emissions and are undertaking a review of the
climate change related risks associated with our Kouroussa, Guinea development
Assessment of our climate change
related risks primarily focuses on our
project as are Pasofino for Dugbe, Libera in their overall DFS planning and development
core operations, but also takes account
process evaluating. No grid power is available at Yanfolila, and the Company continues to
of our supply chain as well as the wider
investigate opportunities for efficiency improvements and reducing our carbon emissions
regulatory and institutional framework.
including assessing options for the use of renewable energy, in particular with a new COO
in place who is reviewing overall Group operational efficiencies.
On site power generation as well as fuel consumption from mining fleet at Yanfolila
Mali is especially vulnerable to the
impacts of climate change. Rainfall in
Mali is controlled by the movement of
continues to represent the vast majority of our Greenhouse Gas (“GHG”) emissions. In
the Inter‐Tropical Conversion Zone,
2020: 40,726.07 MWh of power was generated from diesel generators, operated by
(“ITCZ”) which oscillates between the
Aggreko. A total of 28,198,484.99 litres of fuel was consumed at the Yanfolila site by
northern and southern tropics over the
the generators, process plant, the contract mining fleet and other vehicles resulting in
75,222.28 tCO2e, which equates to 0.75 tCO2e/Au oz.
The rise from 2019 levels in 2020 is mainly due to the processing of harder ores requiring
the consumption of more energy in the process plant and more volumes mined impacting
overall GHG emissions from the mobile fleet.
MALI OPERATIONS – GHG EMISSIONS
GHG Emissions 2020 in tCO2e
Scope 1 *
75,222.28 tCO2e
* Scope 1: emissions are direct GHG emissions that occur from sources that are controlled or owned by an organization
(e.g., emissions associated with fuel combustion in boilers, furnaces, vehicles).
course of a year and brings rainfall to
the southern regions of Mali, where
Yanfolila is located, when it is in its
northern position between June and
October, peaking in August. In the dry
months between November and March,
almost no rain falls. Variations in the
movements of the ITCZ from one year
to another cause large inter‐annual
variability in wet‐season rainfall, which
means that Mali suffers from recurring
drought. It is likely that temperatures
could rise sharply, while precipitation
becomes less reliable and water
availability being generally reduced.
32
HUMMINGBIRD RESOURCES AT THE CORE OF HOW WE OPERATE
ARE OUR ENVIRONMENTAL, SOCIAL
AND GOVERNANCE POLICIES
This has repercussions for important
sectors of the economy such as
agriculture and forestry, animal
LAND DISTURBANCE AND REHABILITATION
The Company continues to implement controls to minimise land disturbance wherever
husbandry, energy and healthcare,
possible. Minimising our footprint is a key focus area to mitigate the negative impact
and therefore, for potential population
this can have on the local communities. In 2020 73 hectares of land were disturbed
movements. Nationally, Mali has
across the project for various purposes. The Company commenced a progressive
prepared a climate action plan that
rehabilitation programme as set out in our environmental permit requirements for
commits to an average reduction in GHG
afforestation, with ~8,000 trees planted over ~20 hectares in 2020. A further 20 hectares
emissions of 27% by 2030 compared to
business as usual, including a reduction
will be planted in 2021, and Hummingbird aims to set up a nursery which will be run
and staffed by the community in 2021 to help with these overall reforestation plans.
of 29% from agriculture, 31% from the
We believe this initiative not only should provide additional livelihood opportunity
energy sector, and 21% from forestry
support for local people, but also increase the likelihood of a higher proportion of the
and land-use. At the same time, the
trees surviving through to maturity with a more engaged community in our overall
country lacks data and resources to
reforestation programmes.
implement its National Climate Change
Action Plan (“PANC”). A project run
jointly by GIZ and UNDP, is helping key
decision-makers to incorporate climate
change aspects into development
strategies, so that these aspects can be
accounted for in planning instruments
for the most vulnerable sectors. There is
a commitment to adaptation with priority
placed on the development of a green
and climate smart economy. Notably,
however, over the last three years the
area around Yanfolila has experienced
periods of extremely high, and disruptive
rainfall, showing the challenges inherent
in medium-term climate forecasting.
Yanfolila’s location in South Western
Mali means that by most predictions,
the biophysical exposure of effects of
climate change are likely to be relatively
low. It is also unclear how rainfall will
be affected. However, socio-economic
sensitivity to extremes of climate is high
and the assessed capacity of many
local communities to adapt is very low.
This is primarily driven by poverty, low
educational levels, poor access to social
services, food insecurity and poverty.
BIODIVERSITY AND PROJECTED AREAS
As stated in our ESG matrix above the Yanfolila historical ESIA studies are to be
reviewed in order to develop a standalone BMP for the operation. We note for
2020 at Yanfolila no significant adverse impacts would be expected to occur from
mine development and that standard mitigation measures would be appropriate.
Hummingbird recognises the potential sensitivities associated with our project location,
in close proximity to the Sankarani River and to the Sankarani-Fie RAMSAR site, across
the international border with Guinea, and we manage our impacts accordingly.
For Kouroussa, Guinea see page 38 for more details on the project’s biodiversity
update and outlook.
At Dugbe, Liberia biodiversity surveys are underway as part of the ESIA in progress.
The previous surveys carried out at site in 2013 and 2014 determined that the area is
Tier 1 Critical Habitat for a number of indicators set out in IFC’s Performance Standard 6.
The current planned biodiversity surveys will update and build on the previous extensive
work. See page 39 for more details.
ENVIRONMENTAL INCIDENTS
No Reportable (High, Major or Extreme)
incident recorded in 2020.
We recorded five environment incidents,
where four minor cases of Loss of
Containment and one moderate case
of Wildlife fatality.
CATEGORY
Extreme
Major
High
Moderate
Minor
NUMBER
0
0
0
1
4
33
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
ENCOURAGING LOCAL
COMMUNITIES IN TAKING
INCREASED OWNERSHIP
ESIA AND PERMITTING
The Yanfolila environment team is
integrated into the development of the
ongoing mining and exploration plans at
Yanfolila by assisting with assessment of
the impact for internal governance, as
well as ensuring all existing permitting
conditions are met.
As we look to explore and develop new
deposits across the Yanfolila licence area,
ESIA activities will be undertaken to ensure
that environmental permits are updated in
line with Malian regulations. The current
environmental permit for Yanfolila covers
open pit mining from KE, KW, Gonka, SW
and Kabaya South. Further ESIA studies
are to be undertaken at the SE deposit as
exploration plans develop and progress is
made to bring the SE deposit into future
mine plans. This includes the requirement
to carry out community resettlement plans
in that area in 2021. Also, new permitting
documentation is needed for a potential
KEUG mine from local authorities that are
scheduled to be completed and approved
by local authorities in 2021.
In terms of ESIA and permitting for
Kouroussa, Guinea and Dugbe, Liberia
we detail those projects progress below.
SOCIAL RESPONSIBILITY AND ENGAGEMENT WITH LOCAL STAKEHOLDERS
2020 was operationally challenging for our Yanfolila mine, made worse by the impact of COVID-19. COVID-19 did impact our community
team’s ability to interact with the local communities, however despite this, we managed to maintain a relatively active level of engagement
with local communities, holding ~120 large scale community meetings on issues relating to: general stake holder initiatives, training, and
engagement in order to ensure ongoing awareness and addressing of concerns in our locally supported communities. We were very pleased
with the site’s safety performance and with the results of our anti-malarial IRS initiative in two villages. In relation to artisanal and small-scale
miners, we recognise continuing tensions at site with those who seek to intrude into our operational areas and hope to make substantive
progress in reducing this in 2021. Other areas of focus for 2021 include maintaining our progress with safety, conducting a community
resettlement at SE in line with international standards, making progress with improving gender diversity and encouraging the increased
participation of local content.
In relation to grievance recording, in 2020 we recorded three new grievances (2019: two). The grievances related to recruitment policies by
the Company and its contractors and were resolved through communication with the relevant stakeholders. The Company continues to
follow local and national employment laws and regulations, where possible prioritising local labour, and requires all contractors to adhere to
the same policies.
34
HUMMINGBIRD RESOURCES ENCOURAGING LOCAL
COMMUNITIES IN TAKING
INCREASED OWNERSHIP
LIVELIHOOD RESTORATION
The advent of COVID-19 at the start of 2020 materially impacted our community liaison
teams ability to interact with our locally supported villages as normal. This hindered our
scheduled work programmes budgeted for and planned for 2020. In the second half of
2020 access to our local communities improved, as the local population became more
knowledgeable about COVID-19 due in part to our team’s public education and awareness
programmes.
Our key livelihood restoration projects achievements during 2020 included:
■
■
■
■
Rehabilitation of the water supply of three markets garden at Soloba, Kona
and Bandjougoufara
Rehabilitation of poultry houses of the villages of Leba, Bougoudalé and Soloba
Training of 30 women of Siekorolé on the processing of cashews
Training of 15 beekeepers in the commune of Yallankoro Soloba
In late 2020 our community team having established a number of programmes and projects,
transferred their focus to encourage and support local communities in taking increased
long-term ownership of and responsibility for these projects and programmes.
For 2021, with a renewed ability to better engage with the local communities in general the
Company is looking to enhance the below community livelihood programmes:
■
■
■
■
■
■
Market gardens: Adding two, bringing the total to ten, employing +700-900
locals (mainly women)
Schools: eleven teacher salaries to continue with scheduled school maintenance
improvements
Poultry farms: Adding two, bringing the total to six, employing >40 locals and
seeing improvements in terms of production techniques, sanitation and overall
business practices
Soap manufacturing: Training on manufacturing and business practices to help
improve the longer-term economic viability of this initiative
Honey initiative: Ongoing training on beehive manufacturing
Hummingbird Tree Initiative: Develop a community led nursery and plant
propagation skills that can contribute to our permit condition of planting a
minimum 20 hectares a year, or +8,000s as part of a progressive
reforestation programme
COMMUNITY INVESTMENT
35
ANNUAL REPORT + ACCOUNTS 2020
OPERATIONAL REVIEW
Our community investment focus by our dedicated on-site teams continued in 2020 with comprehensive community development plans delivered
throughout the year. The advent of COVID-19 did impact our onsite ‘community teams’ to interact with the local communities as normal.
In 2020 a total of US$179,000 (versus US$219,000 budgeted) was spent on three focus areas being: ‘WASH’, education and community
health in particular, as was the case in 2019. These projects were again identified as being priorities from our local communities and related
stakeholders.
Community investment focus areas for 2020
FOCUS AREA
WASH
PROJECT
BENEFICIARIES
During 2020 we rehabilitated: three
water irrigation system inside markets
gardens (Bandjoukoufara, Kona, Soloba
completed), rehabilitated Bougoudale and
Kabaya village water supply system with
a new borehole. Planning to rehabilitate
the remaining three (Tiemba, Komana,
Fougatie) in Q2 2021
Market garden: Villages of Bandiougoufara,
Kona and Soloba a total of 250 women
Water supply: Kabaya, Siekorole, 24,000 people
Construction of 14 latrines
Village of Komana Bozodaga with ~1,200 people
Education
Three-month traineeship programme
in water supply system reparation and
maintenance
10 youths from local communities
Sponsorship of teachers’ salaries
11 teachers across three communes
Community Health
Donation of kits and material
COVID-19 community support, liquid soap
distribution; kits and consumables donation
to Bougoudale CSCOM and Yanfolila CSREF,
and renting accommodation for a COVID-19
community isolation centre
WE BELIEVE IN
PROVIDING SECURITY
AND PROTECTING
HUMAN RIGHTS
36
HUMMINGBIRD RESOURCES ARTISANAL AND SMALL-SCALE MINING
Hummingbird seeks to maintain non-confrontational relations with ASM but is cognisant
of its legal obligations to work closely with host Governments to prevent illegal mining
in permit areas. Hummingbird understands the role that ASM can play in the provision
of livelihoods but is also concerned by the health and safety risks, environmental
impacts of, for example, mercury usage by artisanal groups, as well as the disruptive
impacts that they can have in the local communities.
During 2020 the number of illegal miners seeking to access gold-bearing material
increased at Yanfolila, something experienced by other miners in Mali, with the rise in
the price of gold and increased unemployment and poverty caused by the pandemic
being major factors driving the increased numbers. Amongst corporate responses in
2020 was to fence some priority areas to aid security controls. Hummingbird recognises
the complexities associated with the control and management of ASM activities and
the need for a multi-disciplinary response. We are working with local and national
government to progress a potential regulated ASM corridor in the region as well as
ways to enhance alternative livelihood and eduction programmes.
SECURITY AND HUMAN RIGHTS
The Voluntary Principles on Security and Human Rights were created through a multi-
stakeholder process involving governments (initially led by the US and UK), civil society and
leading mining and oil and gas companies. The Principles set out recognised international
good practices for risk assessments and for the control of private security and public security
forces contracted to protect corporate assets. The objective is that corporate security needs
should not expose local community members to authoritarian or abusive behaviours at the
hands of security personnel. Hummingbird uses the Voluntary Principles as its framework
for risk assessment and the governance of security personnel. The Company believes that
providing security and respecting human rights can and should be consistent.
The Company retains a private security provider as well as receiving the support of a group
of Gendarmes and a National Guard unit. In each case the Company ensures that personnel
are trained on the requirements of the Voluntary Principles. Proactive communication,
community engagement, and grievance redress are central to our approach, including through
collaboration between security and community relations departments. Gender considerations
are also important, as women (including illegal miners) often have different experiences and
interactions with security personnel and risk exposure to gender-based violence.
37
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
STRIVING TOWARDS
A FLAGSHIP ESG
OPERATION
KOUROUSSA, GUINEA ESIA
When the Company acquired the Kouroussa Gold Project an internal review of the
existing ESIA and management systems was completed and an ESIA addendum
commenced in September 2020 seeking to better understand and assess the project
and ensure that best practice requirements are integrated into the design, operation
and closure of the project as per the WGC RGMPs.
Particular areas of focus include:
■
■
■
The project’s location within a RAMSAR site, in relatively close proximity to a
National Park (Parc National du Haut Niger);
The socio-economic baseline given the nearby town of Kouroussa and surrounding
villages and;
The hydrological regime and geochemical nature of the material to be mined
given the proximity to the Niger River.
ESIA Process
Hummingbird contracted several major groups to work concurrently on specialist areas
in order to update or complete baseline studies and impact assessment, as well as
prepare management plans and design criteria.
Insuco (Guinea) have been responsible for completing the socio-economic baseline
and impact assessment, a detailed land study to understand the history and tenure,
as well as a comprehensive land compensation and livelihood restoration plan across
the planned Project footprint.
A consortium of international and national biodiversity experts made up of Treweek
Environmental Consultants (UK), Fairfields Consulting (UK), and Sylvatrop (Guinea)
have completed Phase 1 and 2 biodiversity studies including extensive field surveys
across the project area. This group has deep experience in Guinea and of conducting
biodiversity studies in line with IFC Performance Standard 6 requirements.
Hydrotechnica (UK) continue to work with Hummingbird to complete hydrogeological
and hydrology studies related to mine development and water resources.
Knight Piesold Pty (Australia) have completed climate studies, surface water
management structure design, TSF design and assessment of potential for Acid Rock
Drainage and Metal Leaching of ore and waste rock.
BIODIVERSITY
BASELINE
QUICK FACTS
Despite the project location next
to Kouroussa and widespread
degradation, some Natural Habitat in
relatively good condition is observed:
■
■
Wet bowé
Gallery forest
Baseline surveys found 17 threatened
or restricted range species as per
IUCN Red List.
Confirmation of Endangered and
restricted range frog species
(Phrynobatrachus pintoi) is most
significant and observed in four
locations in the Gallery Forest. This
is a significant extension of its known
range.
No presence of chimpanzees
observed in Study area.
Critical Habitat assessment (IFC PS6)
to be completed in 2021 but on the
basis of the current study only the
presence of Phrynobatrachus pintoi,
is expected to qualify the area as
Critical Habitat.
38
HUMMINGBIRD RESOURCES DEVELOPMENT OF ENVIRONMENTAL AND SOCIAL MANAGEMENT SYSTEM
A key part of the ESIA stage is to develop a detailed and practical Environmental and Social Management System (“ESMS”) that can be
implemented throughout the Project lifecycle.
Hummingbird is committed to the mitigation hierarchy seeking to:
■
■
■
■
Avoid
Minimise
Rehabilitate / restore
Offset
Based on the findings of the ESIA, incorporating international best practice design standards, and Hummingbird’s operating experience
in a similar setting at Yanfolila, the Kouroussa Project has an opportunity to become a flagship ESG operation through Hummingbird’s
implementation of its corporate commitments through the RGMP framework.
DUGBE, LIBERIA
ESIA AND COMMUNITY ENGAGEMENT
We will include more detail on the progress of Dugbe’s DFS and ESIA study by our earn-in
partners’ Pasofino in our 2021 annual report as the work programmes on the DFS and
updated ESIA studies by Pasofino commenced in October 2020.
SRK UK were selected as lead consultants for the ESIA. The formal ESIA process,
mandated by Liberian regulations, commenced with ESIA and RAP field work programmes
initiated and remain ongoing. Completion of the DFS is planned by the end of 2021 based
on current Pasofino expectations.
In terms of overall community engagement, Pasofino designed a detailed community
liaison process to engage with stakeholders, conducted in two phases between October
and December 2020, including a rapid reconnaissance exercise to undertake a social
assessment of the project area, particularly where exploration activities were expected to
commence. This reconnaissance survey was designed to identify key stakeholders and
help the Company to understand prevailing social challenges within the project area prior
to the re-start of activities. The second phase of the process was also completed and
provided a high-level project development presentation to historic and new stakeholders,
decision-makers including the Ministry of Mines and other ministries through to County
Senators, Superintendents and down to village level. Community engagement is ongoing.
DESIGN STANDARDS
FOR BEST PRACTICE
Hummingbird has incorporated best
practice into the design of the project
including:
■
■
■
■
WGC RGMPs
Cyanide Code
ANCOLD 2019 / Global
Tailings Standard
IFC EHS Guidelines
39
ANNUAL REPORT + ACCOUNTS 2020
OPERATIONAL REVIEW
financial review
BASIS OF PREPARATION
The Group’s financial statements have been properly prepared in accordance with International Accounting Standards in conformity with the
requirements of the Companies Act 2006. The Group’s adoption of new and revised standards, significant accounting policies, and critical
accounting judgments are disclosed in the notes to consolidated financial statements. The functional currency of the Group is United States
dollar (“$”). The financial information below is presented in thousands of United States dollars (“$’000”).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
An unabridged analysis of the consolidated statement of comprehensive income for the year ended 31 December 2020 is shown below.
Continuing operations
Revenue
Production costs
Amortisation and depreciation - owned assets
Amortisation and depreciation - right of use assets
Royalties and taxes
Cost of sales
Gross profit
Share based payments
Other administrative expenses
Operating profit
Finance income
Finance expense
Share of associate loss
Share of joint venture loss
Reversals in impairment of financial assets
Gain on financial assets measured at fair value
Profit before tax
Tax
Profit for the year
2020
$’000
2019
$’000
185,072
(93,975)
(29,055)
(12,312)
(6,747)
(142,089)
42,983
(2,081)
(8,928)
31,974
2,014
(9,288)
–
(17)
397
1,203
26,283
(1,135)
25,148
156,874
(86,298)
(27,944)
(10,839)
(5,726)
(130,807)
26,067
(753)
(12,056)
13,258
2,241
(8,278)
(62)
(4)
23
2,218
9,396
(1,551)
7,845
Principal items of income and expense are explained as follows:
REVENUE
Total Group sales was $185.1 million (2019: $156.9 million).
The Group’s Malian subsidiary sold 104,174 ounces of gold dore generating revenue of $181.7 million (2019: 112,686 ounces for
$155.1 million), an 18% increase in revenue. The average realised price for gold dore was $1,745 per ounce (2019: $1,377 per ounce).
The gold dore is sold at a discount to the refined spot gold price which approximates to the refining and transport costs.
The Group also sold gold grain and investment gold coins worth $3.4 million (2019: $1.8 million) at a premium to the spot gold price as part
our SMO Gold initiative.
The Company remains committed to operating as an unhedged gold producer. However, as a single asset producer a significant fall in the
gold price could materially impact the Group’s ability to service debt and meet operating costs. Accordingly, from time to time the Group
invests in low cost put options to partially insure against the risk of falling gold prices without capping the exposure to the upside.
40
HUMMINGBIRD RESOURCES
COST OF SALES
Cost of sales of $142.1 million (2019: $130.8 million) primarily relate to the following cost elements:
■
Mining costs of $48.2 million (2019: $51.7 million), represents both owner and contract mining costs. During 2020, African Mining
Services (“AMS”) were the mining contractor who performed the full mining scope from mining, production drilling and blasting, to ore
haulage for processing. AMS was replaced by Junction Contract Mining (“JCM”) from 1 April 2021 on similar terms. AMS contract was
based on a fixed and variable rate with allowances for inflationary rise and fall adjustments. The mining costs exclude ‘lease’ cost for
the mining equipment of approximately $13.7 million (2019: $11.6 million) now treated as lease payments under IFRS 16.
■
Processing costs of $24.8 million (2019: $20.6 million), represents costs incurred at the processing plant. Major cost categories
include power, plant maintenance and chemical reagents costs. Cost increases were largely due to the increased throughput of the
plant and processing of a greater proportion of harder ores following the installation of the second ball mill in 2019.
■
Inventory adjustments, charge to income statement of $0.8 million (2019: $5.7 million credit to income statement). This represents the
valuation of both gold on hand, stockpiles and gold in process at end of year. There was less gold on hand at 31 December 2020 due
to timing of the shipments at year end. Included in inventory adjustments is $nil (2019: $nil) to carry inventory at lower of cost and net
realisable value.
■
Support costs of $18.0 million (2019: $17.9 million), represents costs incurred in supporting the core mining and processing areas.
Included in this are all site labour, insurance, finance and administration (excluding corporate head office costs), community affairs,
security and human resources. Also included in support costs is a cost of $0.9 million relating to gold put options costs (2019:
$0.8 million).
■
Amortisation and depreciation on owned assets of $29.1 million (2019: $27.9 million). Amortisation and depreciation costs are for
most, based on a unit of production method, in line with ounces produced. The increase year on year reflects a larger depreciable
base offset by lower ounces produced.
■
Amortisation and depreciation on right of use assets of $12.3 million (2019: $10.8 million). This represents depreciation and
amortisation of leased assets following the adoption of IFRS 16, “Leases”, on 1 January 2019. This mainly represents depreciation
on assets leased under the mining contract and the power generators in Mali, as well as offices in Mali and London.
■
■
Royalties and other taxes of $6.7 million (2019: $5.7 million), primarily representing amounts payable to the Government of Mali.
Gold grain and investment gold coins cost of sales of $2.3 million (2019: $1.7 million) representing the cost of purchasing, transporting
gold grain and minting investment gold coins.
OTHER ADMINISTRATIVE EXPENSES
Other administrative costs of $8.9 million (2019: $12.0 million), represents mainly support costs including staff costs and professional fees,
as well as business development costs, a $3.2 million fall from prior year.
FINANCE INCOME AND EXPENSES
Finance income of $2.0 million (2019: $2.2 million), represents interest on deposits and receivables, foreign exchange gains and fair value
adjustments on warrants.
Finance expenses of $9.3 million (2019: $8.3 million), represents interest and amortised costs on borrowings, foreign exchange losses,
and unwinding of present value discounts on provisions.
GAIN ON FINANCIAL ASSETS CARRIED AT FAIR VALUE THROUGH PROFIT
The Group recognised a gain of $1.2 million (2019: $2.2 million) during the year from assets at fair value through profit or loss. This gain
was mainly made up of gains of $1.0 million from the Group’s investment in Cora Gold due to increase in share price over the year with the
balance relating to increase on the investment in Bunker Hill.
41
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
TAXATION
The taxation of the Group’s operations in Mali are aligned to the mining convention (Mining Code of Mali 1999) under which tax is charged
at an amount not less than 1% of turnover and not more than 30% of taxable profits. Following a review of the future profitability of the
Malian subsidiary, in light of the relatively high gold price environment being experienced, deferred tax assets of $12,790,000 and deferred
tax liabilities of $12,106,000 have been recognised on 31 December 2020, resulting in a net income of $684,000 being recognised with tax
expense. These assets and liabilities were previously not recognised due to unpredictability and uncertainty of their recoverability and timing.
STATEMENT OF FINANCIAL POSITION
An abridged analysis of the statement of financial position as at 31 December 2020 is shown below:
$’000
Non-current assets
Current assets
Cash and cash equivalents
Total assets
Non-current liabilities
Non-current borrowings
Current liabilities
Current borrowings
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Non-controlling interest
Total equity
Principal movements in assets and liabilities are explained as follows:
2020
$’000
2019
$’000
248,402
33,076
11,068
292,546
30,743
–
65,334
13,208
109,285
183,261
173,485
9,776
183,261
223,017
29,639
8,529
261,185
18,540
10,148
63,742
29,852
122,282
138,903
135,253
3,650
138,903
TOTAL ASSETS
As at 31 December 2020, the Group’s assets totalled $292.5 million, an increase of $31.4 million on the prior year. The increase was
impacted by a total of $30.7 million assets acquired as part of the Kouroussa Project. Refer to note 23 of the financial statements for further
details. Total assets comprise: Non-current assets; including investments, exploration and evaluation assets, property, plant and equipment,
and Current assets; including cash and cash equivalents, inventories, trade and other receivables.
■
Non-current assets – Increased by $25.4 million during the year, as a result of both additions and offset by depreciation and
amortisation charges. The increase was also impacted by the first-time recognition of deferred tax asset of $684,000 with respect
to the Malian subsidiary following an assessment by management. Included within non-current assets are leased assets capitalised
under IFRS 16, Leases. This standard requires that all qualifying leased assets are recognised on the balance sheet as right of use
assets. Property, plant, and equipment additions included $3.0 million spend on Saniomale West preparations, $3.0 million on
Komana East and West cutback, $2.0 million on Komana East Underground Studies and $2.0 million on increasing the capacity
of the tailings storage facility. A further $4.0 million was spent at Kouroussa post acquisition. Also included in non-current assets is
the $5.0 million (2019: $2.1 million) Bunker Hill investment, as well as investment in Cora of $2.7 million (2019: $1.7 million). Other
additions during the year included exploration and evaluation expenditure of $2.6 million. Depreciation and amortisation charges on
property, plant and equipment was $29.1 million and depreciation on right of use asset of $12.3 million.
■
■
Current assets – Increased by $3.4 million during the year, mainly because of increase to inventory of $2.3 million. Increase to
inventory consisted of $2.0 million increase in spares and reagents inventory due to stockpiling during the COVID-19 pandemic,
increases of $0.7 million in stockpile due to slight increase in tonnage of stockpile, offset by a decrease of $2.1 million in gold on hand
due to timing of shipments. There was also an increase in the grain and coins inventory of $0.9 million compared to previous year.
Cash and cash equivalents – As at 31 December 2020 the Group held cash and cash equivalents of $11.1 million, of which
$4.5 million is restricted in accordance with the Group’s borrowing obligations (2019: $8.5 million, of which $4.1 million was restricted).
See analysis of consolidated statement of cashflow.
42
HUMMINGBIRD RESOURCES TOTAL LIABILITIES
As at 31 December 2020, the Group’s liabilities totalled $109.3 million, a decrease of $13.0 million on the prior year. Total liabilities were
impacted by a total of $1.9 million acquired as part of the Kouroussa Project. Refer to note 23 of the financial statements for further details.
Total liabilities movements impacted by:
■
■
■
Current liabilities (excluding borrowings) – Increased by $1.6 million during the year, mainly related to the one-year extension to
the mining contract and the impact it had on the IFRS 16 lease liabilities. This balance represents the short-term position of the lease
liabilities for the right of use assets.
Non-current liabilities (excluding borrowings) – Increased by $12.2 million during the year, as a result of $5.4 million deferred
considerations to be paid as part of the Kouroussa Project acquisition as well as the $6.8 million, 2% smelter royalty liability retained
by Cassidy as part of the same acquisition. There was also a $1.2 million increase in the rehabilitation provision (including $0.3 million
acquired as part of the Kouroussa Project) representing the present value of estimated future rehabilitation costs relating to mine sites
(note 18).
Borrowings – Borrowings (including capitalised issue costs) decreased by $26.8 million during the year. The decrease is the net result
of a $29.2 million paydown of the existing Senior Loan Facility and Ball Mill Facility plus foreign exchange movements.
CONSOLIDATED STATEMENT OF CASH FLOWS
An unabridged analysis of the consolidated statement of cash flows for the year ended 31 December 2020 is shown below.
Net cash inflow from operating activities
Investing activities
Purchases of intangible exploration and evaluation assets
Purchases of property, plant and equipment
Pasofino funding
Pasofino funding utilisation
Asset purchase, net of cash acquired
Purchase by non-controlling interest
Purchase of shares in other companies
Interest received
Net cash used in investing activities
Financing activities
Exercise of options
Lease principal payments
Lease interest payments
Loan interest paid
Loans repaid
Commission and other fees paid
Net cash used in financing activities
Net increase / (decrease) in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2020
$’000
66,256
(2,601)
(18,136)
5,559
(4,673)
(35)
1,883
(393)
11
(18,385)
532
(12,663)
(1,201)
(2,547)
(29,252)
(571)
(45,702)
2,169
370
8,529
11,068
2019
$’000
44,724
(3,836)
(15,471)
–
–
–
–
(402)
65
(19,644)
30
(11,346)
(525)
(4,280)
(20,809)
(844)
(37,774)
(12,694)
(307)
21,530
8,529
NET CASH GENERATED BY OPERATING ACTIVITIES
During the year ended 31 December 2020, the Group generated $66.3 million cash inflow from operating activities, a $21.5 million increase
from 2019. Net cash flow from operations was higher largely as a result of higher gold sales price during the year. 2020 cash flows from
operating activities exclude ‘lease’ cost for the mining equipment and generators of approximately $13.8 million treated as lease payments
under IFRS 16 and which is reflected under financing activities.
43
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
NET CASH USED IN INVESTING ACTIVITIES
During the year ended 31 December 2020, the Group reported a $18.4 million cash outflows from investing activities (2019: $19.6 million
cash outflow), $18.1 million on property plant and equipment. $2.6 million exploration and evaluation assets, largely in Mali. The Group
also received $5.6 million from Pasofino as part of the earn-in agreement on Dugbe, of this advance $4.7 million was utilised by year end.
$1.9 million was received from the Government of Mali for part consideration of their additional 10% non-controlling interest in the Mali
subsidiary.
NET CASH USED IN FINANCING ACTIVITIES
During the year ended 31 December 2020, the Group reported a $45.7 million cash outflows from financing activities (2019: $37.8million
cash outflow), of which $32.4 million was scheduled debt, fees and interest repayments on borrowings.
Future obligations and their maturities stated at their gross, contractual and undiscounted amounts, are shown below:
AT 31 DECEMBER 2020
Trade and other payables (note 21)
Other financial liabilities (note 22)
Deferred consideration (note 23)
Lease liabilities (note 19)
Borrowings (note 17)
Other commitments (note 30)
AT 31 DECEMBER 2019
Trade and other payables (note 21)
Other financial liabilities (note 22)
Lease liabilities (note 19)
Borrowings (note 17)
Other commitments (note 30)
LESS THAN ONE YEAR
$’000
BETWEEN ONE AND FIVE YEARS
$’000
OVER FIVE YEARS
$’000
39,440
15,000
–
10,894
13,208
78,542
2,278
80,820
–
6,836
5,402
2,380
–
14,618
–
14,618
–
–
–
–
–
–
–
–
LESS THAN ONE YEAR
$’000
BETWEEN ONE AND FIVE YEARS
$’000
OVER FIVE YEARS
$’000
39,809
15,000
8,933
29,852
93,594
2,286
95,880
–
–
3,661
10,148
13,809
–
13,809
–
–
–
–
–
–
–
TOTAL
$’000
39,440
21,836
5,402
13,274
13,208
93,160
2,278
95,438
TOTAL
$’000
39,809
15,000
12,594
40,000
107,403
2,286
109,689
NON-GAAP FINANCIAL PERFORMANCE MEASURES
The performance of the Group against its strategy and objectives is linked to the remuneration of the executives and senior employees;
as the annual bonus plan performance targets are aligned to the Group’s Key Performance Indicators (“KPIs”) and strategic priorities.
We use the following non-GAAP financial performance measures in assessing performance.
■
■
■
■
EBITDA and adjusted EBITDA
Cash costs per ounce; and
All-in sustaining costs per ounce (“AISC”).
Net cash
44
HUMMINGBIRD RESOURCES
EBITDA AND ADJUSTED EBITDA
Earnings before interest, taxes, depreciation and amortisation (“EBITDA”) is a factor of volumes, prices and cost of production. This is a
measure of the underlying profitability of the Group, widely used in the mining sector. Adjusted EBITDA removes the effect of impairment
charges, foreign currency translation gains/losses and other non-recurring expense adjustments but including IFRS 16 lease payments.
Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA
Net profit before tax
Less: Finance income
Add: Finance costs
Add: Depreciation and amortisation
EBITDA
IFRS 16 lease interest and principal payments
Share based payments
Taurus settlement plus legal fees
Taurus case legal fees
Other taxes
Share of associate loss
Share of joint venture loss
Reversals in impairment of financial assets
Gains on financial assets measured at fair value
Adjusted EBITDA
2020
$’000
26,283
(2,014)
9,288
41,685
75,242
(13,864)
2,551
–
–
–
–
17
(397)
(1,203)
62,346
2019
$’000
9,396
(2,241)
8,278
39,095
54,528
(11,871)
850
2,500
723
1,718
62
4
(23)
(2,218)
46,273
NET CASH RECONCILIATION
The Group managed to achieve net cash at the end of the year having serviced bank debt of $32 million (capital and interest) during the
year, ending the year with US$1.5 million of net cash with the remaining US$13.2 million of outstanding bank debt expected to be repaid
by June 2021.
Net cash for the Group can be reconciliated to the cash in the statement of financial position as follows:
Reconciliation of net cash
Group cash balances (including restricted cash)
Add: Gold on hand (including SMO gold)
Less: Bank debt
Net Cash
2020
$’000
11,068
3,655
(13,208)
1,515
45
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
CASH COST PERFORMANCE
Cash costs per ounce and all-in sustaining costs per ounce are non-GAAP financial measures which are calculated based on the definition
published by the World Gold Council (“WGC”), a market development organisation for the gold industry. Management uses these measures
to monitor the performance of our gold mining operations and their ability to generate positive cash flow.
Cash costs are calculated as direct mine operating costs (including mine based general and administration costs but excluding depreciation
and amortisation) divided by ounces of gold sold.
All-in sustaining cash cost is calculated as cash cost above plus sustaining capital expenditures divided by ounces of gold sold.
Our use of cash costs and all-in sustaining cash costs are intended to assist analysts, investors and other stakeholders to understand the
costs associated with producing gold better as well as assessing our operating performance and our ability to generate free cash flow from
current operations.
Reconciliation of Cost of Sales to Cash Costs, All-in Sustaining Costs including on a per ounce basis
Cost of sales applicable to mining operations
Administration expenses related to mining operations
Depreciation and amortisation related to mining operations
Lease charges under IFRS 16 relating to mining operations
Corporate recharges applicable to mining operations eliminated on consolidation
Cash cost
Mine sustaining capital expenditures
All-in sustaining cash cost
Ounces sold
Cash cost per ounce
All-in sustaining cash cost per ounce
2020
$’000
2019
$’000
139,761
167
(41,367)
13,673
2,759
114,993
4,529
119,522
104,174
1,104
1,147
129,059
2,643
(38,783)
11,617
1,543
106,079
5,012
111,091
112,686
941
986
Cash costs were adversely impacted mainly due to the low production due to extreme weather events as well as the impact of COVID-19.
Exploration costs and expansion capital expenditures, for example costs incurred on Gonka, SE, SW and KE Underground studies, which
are all still under development, are not included in AISC. Further exploration costs on new deposits are also excluded from our AISC number.
46
HUMMINGBIRD RESOURCES strategic review
The purpose of this report is to show how the Group assesses and manages risk and uncertainty and adopts appropriate policies and
targets. Further details of the Group’s business and expected future developments are also set out elsewhere (the Chairman’s Statement,
CEO’s Statement, How We Operate, Operational Review and Financial Review) form part of this Strategic Review in order to achieve
compliance with provision of the Companies Act 2006.
PRINCIPAL RISKS AND UNCERTAINTIES
The nature of the Group’s activities and the locations in which it operates mean that it is generally exposed to significant and uncertain risk
factors, some of which are beyond its control. The ability to deliver the Group’s objectives and vision depends on an ability to understand
and appropriately respond. The table below, while not exhaustive, sets out the principal risk factors and uncertainties which may impact the
Group’s future performance, and its strategy for managing them.
RISK
Asset portfolio
MITIGATION / MANAGEMENT RESPONSE
The Group’s revenue is primarily derived from the Yanfolila Gold
The Group continually reviews and implements targeted projects
Mine in Mali. Reliance on a single asset requires continual focus on
seeking to enhance the reliability, effectiveness and long-term
efficient management of operations and risks.
profitability of the Yanfolila Gold Mine.
Should cash flows from the Group’s sole producing asset be
The Group continuously assesses a range of internal and external
impacted adversely from an unexpected event, the Group may need
growth opportunities to build on its existing asset portfolio as well as
to raise additional funding. Should additional funding be required,
ensuring that efficient production from Yanfolila is maintained. The
then as noted in note 3, there is a risk that the Group may not be
following represents focus on those areas:
able to obtain it in the necessary timeframe.
■
The acquisition of the Kouroussa Project in Guinea during
the year provides the Group with optionality and moves the
Company towards being a multi asset producer.
■
The signing of the earn-in agreement with Pasofino also
ensures the Dugbe Project in Liberia is progressed.
■
Further, ongoing exploration activities in Mali provides internal
growth opportunities.
Changes to commodity prices, cash flow and credit risk
As a junior mining company operating its first gold mine, the Group’s
The Group monitors its exposure to commodity price fluctuations
financial performance is significantly exposed to the price of gold.
and foreign exchange rate fluctuations as part of financial and
Should the gold price fall significantly this will impact future reserves,
treasury planning.
profitability and could ultimately impact the Group’s ability to service
debt and meet operating costs.
The Board reviews these risks regularly (including at the quarterly
Board meetings) and considers whether any additional actions
Financial performance may also be impacted through foreign
are appropriate, taking into account forecasts and expectations of
exchange movements, rises in fuel prices or where there is an
stakeholders.
inability to secure adequate funding.
The Company from time to time purchases low cost put options as
partial insurance against a significant drop in the gold price in the
short term.
47
ANNUAL REPORT + ACCOUNTS 2020
OPERATIONAL REVIEW
RISK
Mining risk
MITIGATION / MANAGEMENT RESPONSE
The Group’s financial performance is largely dependent on the
The Group continuously reviews its mining methods and, together
efficient operation of the Yanfolila Gold Mine in Mali. This requires
with the mining contractor, assesses performances against targets
effective management of the mining contractor, strip ratios, mining
on a regular basis.
techniques, dewatering, infrastructure and pit slopes in ensuring cost
effectiveness and timely delivery of material at sufficient quantity and
grade for processing.
Any significant delays in delivering the planned ore volumes or
additional costs of mining, ore losses and additional dilution could
lead to the project requiring additional working capital or becoming
uneconomic.
Geological risk
The Groups cashflows and profitability is dependent on achieving
Geological models are subject to internal and external reviews
the predicted grades and tonnages of ore forecast in the mine
before being classified as resources and reserves or being used to
plans. The mine plans are based on geological models, supported
support mine plans. Additionally, as further information becomes
by resource and reserve estimates. Resources and reserves
available, including through mining, geological models are updated
are estimated based on assumed continuity between points of
accordingly.
observation where data samples have been gathered. Until material
is mined and processed, there is a risk that the grades and tonnages
of ore may be materially different to that estimated, including through
unanticipated incursions by artisanal mining groups.
Fraud, error and corruption
The Group is aware of the risk of internal fraud, error and corruption
The Group has robust policies and internal controls in place with the
activities, and the various ways that such risk may transpire. There is
objective of mitigating the risk of fraud, corruption and error to the
also awareness that the risk is increased where there are differences
business.
in financial processes, language or culture between stakeholders.
Operational performance and reporting
As a listed company, the Group acknowledges the importance of
The Group’s focus on a culture of sustainability, good governance
communicating actual and forecast operational performance on a
and disclosure is aimed to provide timely information on activities
timely basis.
Social licence to operate
impacting shareholders and other key stakeholders.
The Group’s ability to develop and operate its projects is dependent
The Group is proactive in its social engagement and places a high
on the support of its host communities.
importance on its relationship with the host communities as key
Overall relations with the host communities have been positive,
however there is a risk that if the relationships deteriorate then the
ability of the Group to operate could be temporarily or permanently
stakeholders.
adversely impacted.
Safety
The mining workplace environment is subject to a number of
The Group employs a wide range of safety management systems
hazards, including the risk of serious injury or fatality while working
with the objective of ensuring the safety of the team. The Group
on site. The physical remoteness of sites also increases the risk
provides training and supervision on safety management, which the
of commuting to site and the availability of medical assistance in
intention of promoting and embedding safe operating practices.
the event of an incident. The Group is also aware of the risk of
The Board is able to draw upon the expertise of its Environment,
an outbreak of a serious illness amongst the workforce and the
Social and Governance Committee and its medical adviser Critical
associated potential for large-scale disruption to operations as a
Care International (“CCI”) for guidance.
consequence.
48
HUMMINGBIRD RESOURCES RISK
Security and conflict risk
MITIGATION / MANAGEMENT RESPONSE
The Group is exposed to the external physical security risks
The Group employs a range of measures to mitigate the risk of harm
presented by artisanal mining activities, territorial conflicts and/or
to our people and operations. Country and regional information is
terrorist actions which could impact our people, our operations and
continuously monitored to assess the risk of terrorism and security
our broader supply chain.
plans are in place to mitigate identified risks including relative to
the OECD Due Diligence Guidance on the responsible sourcing of
minerals from conflict-affected and high-risk areas. The Company is
seeking to pursue an ASM formalisation initiative in partnership with
government so as to reduce the potential for conflict with ASM.
Geopolitical, legal, and regulatory risks
The Group’s exploration, development and exploitation activities are
The Group monitors legal and geopolitical risks as a key part of
dependent upon the grant of appropriate licences, concessions,
its overall assessment process when considering changes to
leases, permits and regulatory consents which may be withdrawn
operations or pursuing new growth opportunities.
The Group actively engages with Governments and policy makers at
the most senior levels to discuss regulatory developments that are
applicable to the Group’s business activities.
or made subject to limitations. Such licences and permits are as a
practical matter subject to the discretion of the applicable Government
or Government office. The Group must comply with known standards,
existing laws and regulations that may entail greater or lesser costs
and delays depending on the nature of the activity to be permitted.
The interpretations, amendments to existing laws and regulations,
or more stringent enforcement of existing laws and regulations could
have a material adverse impact on the Group’s results of operations
and financial condition. Whilst the Group continually seeks to do
everything within its control to ensure that the terms of each licence
are met and adhered to, third parties may seek to exploit any technical
breaches in licence terms for their own benefit.
There is a risk that negotiations with a Government in relation to
the grant, renewal or extension of a licence, or Mineral Development
Agreement (“MDA”), may not result in the grant, renewal or extension
taking effect prior to the expiry of the previous licence period, and
there can be no assurance of the terms of any extension, renewal
or grant.
Additionally, whilst the Group has diligently investigated title to its
licences and, to the best of its knowledge, title is in good standing,
this should not be construed as a guarantee of title. If a title defect
does exist it is possible that the Group may lose all or part of its
interest in the relevant properties.
Changes to existing applicable laws and regulations, more stringent
interpretations of existing laws or inconsistent interpretation or
application of existing laws by relevant authorities have the potential
to adversely impact the Group’s business activities.
The Group’s operational and exploration activities are subject to
extensive regulation in the relevant jurisdictions.
Exploration and development risk
There is no assurance that the Group’s exploration and development
The Group aims to conduct exploration on a systematic basis
activities will be successful, and statistically few properties that are
focusing on opportunities to increase long term shareholder value
explored are ultimately developed into profitable producing mines.
within available budgets.
The 2020 Mineral Resource Estimate for Yanfolila was announced
on 30 March 2021, reflecting continued focus on exploration and
future development of the Company.
Where appropriate the Group will consider farmouts and joint ventures
such as with Pasofino on the Dugbe Project and with Cora Gold.
49
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
RISK
Capital project delivery
MITIGATION / MANAGEMENT RESPONSE
Following the Kouroussa Project acquisition in Guinea, the Group
The Group previously delivered the Yanfolila Project on time and on
is embarking on a large-scale capital project.
budget.
Large capital projects require multi-year execution plans. The
The team tasked with delivery of the project are supported by an
Group’s ability to deliver projects in terms of safety, cost and
experienced Technical Advisory Committee (“TAC”) and Board.
schedule – may vary due to changes in technical requirements,
Our methodology includes:
law and regulation, government or community expectations,
skills, availability of funding or through commercial or economic
assumptions proving inaccurate through the execution phase.
■
■
Delays and overruns in projects could negatively impact our
profitability, cash flow, ability to repay project-specific debt and
relationships with key stakeholders.
Corona virus 2019 – COVID-19
Following strict budgetary and project approval processes
Constant monitoring and status evaluation, together with
ongoing stakeholder engagement
■
Strong focus on contractor management
On March 11, 2020, the World Health Organization (“WHO”)
Throughout 2020 and to date, the Group put in place plans and
declared the outbreak of the coronavirus (COVID-19) a pandemic.
procedures to meet the Groups’ primary objective of ensuring
The potential for transmission across our sites, workforce,
immediate communities and supply chains continues to be a
threat that requires management to guard against. These risks
primarily involve potential disruptions to logistical movement, both
into and out of our operational areas, of people, goods, supplies,
spares, reagents and the export of gold which may impact our
ability to operate.
Whilst the Company has continued to ensure it has the necessary
supplies to last for the immediate short term, there remains
some uncertainties into how long this pandemic will last. The
development and roll out of vaccines across the globe and the
social distancing measures put in place, has seen the decrease in
the cases reported in recent months, however, there still remains
a risk of flare ups which ultimately this may result in the Company
being forced to close its production facilities due to lack of spares
and reagents.
To date there has been disruptions to production due to COVID-19,
due to longer lead times in getting spares on site, as well as
significant cost pressures already felt by the Company.
Therefore, there remains a risk that challenges being placed on the
business, and the wider economy will impact the Group’s ability to
operate, which will ultimately impact its cash flows.
business continuity for the long-term benefit of all our stakeholders,
as well as minimise any risk that may contribute to the virus
spreading. These include:
■
■
■
COVID-19 testing and screening procedures across the sites.
Hygiene practices and availability of adequate PPE.
Physical distancing and segregation measures to prevent
transmissions.
■
Organising short term alternative shipping arrangements –
both gold exports as well as consumables and supplies to
help manage the logistical challenges.
■
Focusing on maintaining stockpiles and inventories that
could be utilised should logistics or mining be disrupted.
■
Restrictions on travel, providing up-to-date resources to all
employees and guidance on working remotely where required.
These have been put in place across the entire Group, with
special focus on the Yanfolila Mine, in order to protect, support
and secure the operating environment and local communities, and
protect the health, safety and fitness-to-work of our workforce.
Whilst there have been a limited number of cases on our mine
sites, these have been managed in line with the Company’s internal
protocols and plans which has to date proved to be effective in
controlling significant infections and transmissions within the sites.
The Group was able to draw upon the expertise of Critical Care
International to developing its approach to the pandemic.
SECTION 172 STATEMENT
The Board of Directors (the “Board”) consider that they have acted responsibly and appropriately in discharging their duties under the
Companies Act 2006 (the ‘Act’), including their duty to act in the way that they consider, in good faith, to be most likely to promote the
success of the Company for the benefits of the members, having due regard, amongst other matters, set out in section 172 in the Act:
the likely consequences of any decision in the long term,
the interests of the Company’s employees,
the need to foster the Company’s business relationships with suppliers, customers and others,
the impact of the Company’s operations on the community and the environment,
the desirability of the Company maintaining a reputation for high standards of business conduct, and
the need to act fairly as between members of the Company.
■
■
■
■
■
■
50
HUMMINGBIRD RESOURCES The Board have overarching decision making authority for the Company on a number of reserved matters. The Directors continue to act in a
way that they consider, in good faith, to be most likely to promote the success of the Company for the benefits of the members as a whole.
At every Board meeting, the Chief Executive and Chief Financial Officer report on the safety, operating and business performance of the
Group against our Key Performance Indicators, as well as how certain material stakeholder issues are being managed.
Details of the Board’s decisions in 2020 (and subsequently) to promote long-term success, how it engaged with stakeholders and
considered their interests when making those decisions, can be found throughout the Annual Report.
Our business and the decisions that we make affect the lives of many. Understanding the interests of our stakeholders, as well as our
shareholders, remains the Board’s priority. Below is a summary of our key stakeholders and summarise their interests, how the Board has
engaged with them, and how what the Board has heard has influenced our decision-making.
Employees
Hummingbird is proud, and grateful, for the contribution of its 534
How the Board has taken account of these interests
strong workforce across its west African operations and at corporate
head office. People are central our ambitious corporate goals, most
notably around our vision as a responsible miner. Ensuring a safe
working environment for all our employees is paramount and a key
focus throughout to the Company’s leadership structure.
How we engage and communicate
■
■
COVID-19 impacted our ability to engage extensively with our
employees during the year.
COVID-19 affected our people and also reduced the efficiency of
our supply chain, our ability to access external expertise at the
mine, and has prevented the sort of face-to-face contact that we
believe is invaluable in building a strong team for the long term.
■
Increased use of virtual meetings was essential during this
period, and an improved performance management process
is in the process of being implemented.
Communities and governments
■
In early 2020 and in subsequent meetings, the Board
discussed the impact of COVID-19 on the business including
management responses and measures being put in place to
combat the pandemic and keep our employees safe.
■
The Board received regular updates on people related
initiatives. In 2020 the Board received and approved the
appointments of key employees within the Group to support
the Chief Executive and Chief Financial Officers in delivering
their duties.
■
The Board approved an external review of our organisational
structure and internal communications which resulted in the
appointment of a Group People and Performance Officer in
early 2021.
Our social licence to operate is vital to our success and we seek to
How the Board has taken account of these interests
take a proactive approach in building trust with the communities we
are part of. We recognise our business operations have the potential
to impact these communities both positively and negatively. Our
communities expect us to commit to high standards in managing our
environmental footprint and respecting community and human rights
How we engage and communicate
■
We consult with our communities regularly, through our
dedicated community teams at each site, and always aim to
do so in good faith, and in ways that are transparent, inclusive,
■
In May 2020 the Board received and assessed political risks
across its operational areas and in particular the coup in Mali
and its potential impacts on the Malian operations
■
The Board has overall oversight on all ESG matters, and
as part of the focus on strengthening this area the Board
discussed and approved the Company joining the World Gold
Council (“WGC”) in September 2020, with the intention to be
fully compliant with the Responsible Gold Mining Principles
framework by September 2022.
and culturally appropriate.
■
The Board approved financial support to both national and
■
We aim to make our engagement programmes participatory
and representative of the community, including women, youth
local governments in response to the impact of COVID-19 as
well as the provision of medical supplies for use in the local
and vulnerable people.
communities around Yanfolila.
■
In 2020, COVID-19 did impact the Company’s health, safety,
■
The Board acknowledged the impact of the change of
environmental and our teams’ ability to interact with local
communities.
Despite these challenges, we did see progress with our community
project initiatives in Mali at our locally supported market gardens,
poultry farms, soap manufacturing, honey and education
programmes. In the second half of 2020 a renewed focus was put on
infrastructure improvements at existing community projects such as
water bore holes and water tower improvements, school infrastructure
repairs, local healthcare and poultry farm building improvements.
government in Mali during the year and COVID-19 restricting
ability to interact with local communities and artisanal miners
in general. Interactions at the government level for overall
ASM risk mitigation measures were increased in 2H 2020 and
remains a focus for 2021.
51
ANNUAL REPORT + ACCOUNTS 2020 OPERATIONAL REVIEW
Shareholders and other capital providers
Our investors, who include both Institutional and private, have put
How the Board has taken account of these interests
their faith in the Group to provide them with a financial return and
expect us to allocate capital with discipline to create shareholder
value. Our investors are interested in our strategy, the culture of the
Group, sustainability, our operational and financial performance as
well as the risks that may affect our business.
How we engage and communicate
■
■
We hold an annual general meeting (“AGM”) each year where
shareholders and analysts are invited.
From time to time we conduct analysts site visits for them
to explore our sites and see the work we do including our
community programmes.
■
Due to COVID-19 our 2020 AGM was virtual, however all
written questions were responded to either in writing or
verbally by senior management.
The objective of delivering long term shareholder value is paramount
in all the board’s decision making.
Investor feedback is taken into account when the Board is making
decisions.
Some of the key investor feedback over the years have been the risk
of a single producing asset, our short mine life impacting the share
price and the lack of value given to Dugbe externally. To address this
the Board:
■
In May 2020 an independent subcommittee of the Board
received management recommendations and considered the
earn-in arrangement with ARX. The earn-in was in subsequent
meetings approved. The earn-in was approved on the basis it
could allow the Company to unlock the considerable value in
the Dugbe with an experienced partner who shares our vision
■
Our relationship with our West African banking partner, Coris
in Liberia.
International (“Coris”), remains strong with their continued
support of our growth strategy. Our CEO, CFO and our West
African Regional Director are in regular communication with
Coris and where COVID-19 restrictions allowed, face to face
meetings were held.
■
In June 2020, the Board received a presentation from
management and reviewed and assessed the due diligence
undertaken on the Kouroussa Gold Project in Guinea and in
subsequent meetings approved the acquisition of this project.
The acquisition was deemed a strategic fit in furthering the
■
We also maintain a comprehensive programme of engagement
Company’s mission to become a multi asset, multi jurisdiction
with investors through our quarterly market updates and
gold producer.
investor presentations, including VOX Markets podcasts and
other investor relations podcasts. Going forward this will be
further increased in 2021, including Investor Q&A sessions
■
Reviewed and approved exploration programmes and
budgets targeting increased mine life.
through various platforms.
The Board believes that the above as part of our stated strategy will
deliver long term shareholder value.
Customers and suppliers
We strive to build long-term relationships with our customers and
How the Board has taken account of these interests
suppliers based on trust and mutual benefits. Our success is directly
The board discusses the relationships with key suppliers regularly.
correlated with our ability to successfully work these key partners.
For example:
This requires open and honest lines of communication to ensure
we work together safely and maintain uninterrupted operations. Our
partners worked closely with us throughout 2020 to manage the
impacts of the COVID-19 pandemic and ensure that our operations
■
The Board discussed the Yanfolila mining contractor’s
performance and subsequent approval for a one-year
extension to the contract to September 2021.
remained operational and safe.
How we engage and communicate
■
We regularly hold meetings with our suppliers and partners
to review performances for the mutual benefits of our
organisation.
■
Our suppliers are important to us and at Yanfolila we made
purchases $101 million to supplier globally with a significant
portion of this being spend on local and national suppliers in
Mali.
■
The board reviewed the tender submissions for a new mining
contractor at Yanfolila and approved the early termination
of the existing mining contract and appointment of Junction
Contract Mining (“JCM”).
The Board have overarching decision making authority for the Company on a number of reserved matters. The Directors continue to act in a
way that they consider, in good faith, to be most likely to promote the success of the Company for the benefits of the members as a whole.
This Strategic Review has been approved by the Board and signed on its behalf by:
DE Betts
Director
26 May 2021
52
HUMMINGBIRD RESOURCES corporate governance
The Board of Hummingbird Resources PLC (the ‘Company’) has adopted the QCA Corporate Governance Code 2018 (the ‘QCA Code’)
and believe the application of the QCA Code supports the Company in pursuing medium to long-term value for shareholders, without stifling
the entrepreneurial spirits and creativity. The Board believes that it applies the ten principles of the QCA Code but recognises the need to
continue to review and develop governance practices and structures, to ensure they are in line with the growth and strategic plan of the
Company. The 10 QCA principles and how the Company has applied them can be found on the website.
STRATEGY AND BUSINESS MODEL
The Company currently has two core gold projects, the Yanfolila Gold Mine in Mali and the recently acquired Kouroussa Gold Project in
Guinea. Additionally, the Company controls the Dugbe Gold Project in Liberia that is being developed by Pasofino Gold Limited through
an earn-in agreement.
The Strategic Review on pages 47 to 52 provides details the Company’s strategy, as well as key risks and mitigation actions.
UNDERSTANDING AND MEETING SHAREHOLDER NEEDS AND EXPECTATIONS
The Company’s Executive Committee meets institutional shareholders, fund managers and analysts to understand how the strategy and
the Board’s decisions impact on and is received by shareholders.
Shareholders are encouraged to engage with the Company throughout the year through RNS announcements, direct communication,
conference calls, website content, corporate presentations together with national and international medias including social media.
Additionally, shareholders are typically invited to the AGM where they are given opportunities to ask questions. Where this is not practical
(for example in 2020 it was not possible to invite shareholders to the AGM due to COVID-19 travel restrictions) shareholders are encouraged
to submit questions to the Company in advance of the AGM.
Contact details are provided within every Company announcement and are available on the Company’s website.
WIDER STAKEHOLDER NEEDS AND SOCIAL RESPONSIBILITIES
In accordance with Section 172 of the UK Companies Act 2006, the Board has a duty to promote the success of the Company for the
benefit of its members as a whole. In doing so, it must have regard (amongst other matters) including the interest of the Company’s
employees, the need to foster the Company’s business relationship with host governments, suppliers, customers and others, and the
impact of the Company’s operations on local communities and the environment.
The Board has always recognised the relationships with key stakeholders are central to the long-term success of the business and
therefore seeks active engagement with all stakeholder groups, to understand and respect their views, in particular of those with the local
communities in which it operates, its host governments, employees and suppliers.
Details of the Board’s decisions in 2020 to promote long-term success, and how it engaged with stakeholders and considered their interests
when making those decisions, can be found throughout the Operational Review, Strategic Review and Directors reports.
The World Gold Council (‘‘WGC’’) launched the Responsible Gold Mining Principles (‘‘RGMPs’’) in September 2019, an overarching
framework that represent international best practices in exploration, operation and closure of gold mines. The Company, as part of its
support of international best practices, declared its intent to adopt the RGMPs and to work towards the September 2022 full conformance
deadline. Responsible gold mining is conducted with respect for the environment, the human rights and wellbeing of our employees,
contractors and members of the communities associated with our activities.
The Responsible Mining page on the Company’s website provides details regarding our commitment to creating value for all stakeholders
and building a lasting legacy for the communities living within its licence areas.
53
ANNUAL REPORT + ACCOUNTS 2020
GOVERNANCE
EFFECTIVE RISK MANAGEMENT THROUGHOUT THE ORGANISATION
The Company has four committees to assist in its continuous assessment and management of potential risks to the Company, both from
a corporate and project perspective:
■
■
■
■
The Audit Committee
The Remuneration Committee
The Technical Advisory Committee (“TAC”)
The Environment, Social and Governance (“ESG”) Committee
The Audit and Remuneration Committees aim to meet a minimum of four times a year; whilst the Technical Advisory and ESG Committees
typically meet monthly.
The Board receives and reviews reports on Company’s principal risks on a regular basis, including Political, Social, Financial, Mining and
Technical risks. Control mechanisms have been put in place for the purpose of monitoring and mitigating these risks.
A BALANCED AND WELL-FUNCTIONING BOARD LED BY THE CHAIRMAN
The Board consists of the Non-Executive Chairman, Chief Executive Officer, the Finance Director and five Non-Executive Directors
(including the Chairman). All Non-Executive Directors are considered to be independent, and the Board believes there to be an appropriate
composition, given the size and nature of the business.
Biographies of all Directors are included on pages 68 and 69.
The Board endeavours to meet on a quarterly basis and holds additional meetings either in person or by conference calls to review and,
if considered necessary, make plans to improve Company performance.
The Board had four scheduled meetings in 2020 and where necessary additional meetings were held to discuss matters outside of the
Board’s regular agenda items. During 2020, we have had to adapt to the challenges associated with COVID-19. As a consequence, most
meetings have been held virtually. The table below shows the number of meetings of Board and committees during the year to
31 December 2020:
DIRECTOR
Russell King
Dan Betts*
Thomas Hill*
Stephen Betts
David Straker-Smith
Attie Roux
Ernie Nutter
BOARD OF
DIRECTORS
AUDIT
COMMITTEE
REMUNERATION
COMMITTEE
6/6
6/6
6/6
6/6
6/6
6/6
6/6
–
–
–
–
6/6
–
6/6
–
–
–
–
4/4
–
4/4
TECHNICAL
ADVISORY
COMMITTEE
–
–
–
–
–
13/13
13/13
*
The CEO and CFO were invited to and regularly attended TAC and Remuneration Committee Meetings. The CFO was invited to and regularly attended Audit Committee meetings.
The Chairman, CEO and CFO are all routinely invited to and regularly attended meetings of the ESG Committee.
EXPERIENCE, SKILLS AND CAPABILITIES OF THE BOARD
The Board is satisfied that the current Directors have a breath of experience, skills and capabilities relevant to the Company’s evolving
activities.
All Directors retire at intervals in accordance with the Company’s Articles of Association, and if appropriate offer themselves for election
by the shareholders.
The Directors have gained their skillsets and knowledge through experience in gold exploration, development and production, as well as in
wider business sectors; their skillsets and knowledge are kept up to date by the Company’s advisory teams, involvement and participation in
industry conferences, and through their own continuing professional development.
The Company Secretary ensures the Board is informed of its legal responsibilities, and the Company is compliant with applicable regulatory
requirements and legislation. The Board also has access to advice from external bodies such as the Company’s nominated advisor, auditors
and lawyers.
54
HUMMINGBIRD RESOURCES BOARD EVALUATION
The Board reviews its performance quarterly, seeking to identify opportunities for improvement with the overriding objective of maximising
long-term shareholder value.
CORPORATE CULTURE
A key part of the Board’s function is to ensure that there are sound ethical values and behaviours upheld throughout the organisation.
The Company has four organisational principles as set out on page 3.
The Company strives to drive environmental and community projects which will leave the environments where we work a better place for
the long term. The Company aims to build a legacy of improvement in the education, health, standard of living and environment in the places
where it has been and wants to be known for always dealing in an honest and respectful manner at all times.
People are central in the Company’s long-term success, and therefore the Company encourages opportunities for people to develop their
skills to the best they can, to learn, to grow and above all, to challenge.
Honesty and trust are paramount values throughout the business.
DIVISION OF RESPONSIBILITIES
The Chairman and Chief Executive have separate, clearly defined roles. The Chairman leads the Board and is responsible for its overall
effectiveness in directing the Company and the Chief Executive is responsible for implementing the Group’s strategy and for its operational
performance.
GOVERNANCE STRUCTURE AND PROCESSES
The Chairman is responsible for the Company’s adherence to an appropriate corporate governance structure. Detailed roles and
responsibilities of the Directors can be found on pages 53 to 56.
The Board is supported in its decision making by four committees. Each committee has Terms and Reference setting out its duties,
authorities and reporting responsibilities.
Audit Committee
The Audit Committee oversees and reviews the Company’s financial reporting and internal control processes, its relationship with external
auditors and the conduct of the audit process together with its process for ensuring compliance with laws, regulations and corporate
governance. The Company’s external auditors are invited to attend the meetings of the Committee on a regular basis. The Audit Committee
comprises David Straker-Smith (Chairman) and Ernie Nutter.
Remuneration Committee
The Remuneration Committee is responsible for determining the framework and policy for the remuneration of the Company’s Chairman
and the executive directors including pension rights and compensation payments. The Committee is also responsible for making
recommendations as to the level and structure of remuneration for senior management. The Remuneration Committee comprises
David Straker-Smith (Chairman) and Ernie Nutter.
Technical Advisory Committee
The Technical Advisory Committee acts as an independent body of experts for the Company in order to establish formal and transparent
arrangements to assist the Company in assessing and guiding technical and operational performance. The TAC comprises Attie Roux
(Chairman), Ernie Nutter, John Meneghini and Wayne Galea.
ESG Committee
The ESG Committee acts as an independent body of experts to establish formal and transparent arrangements for considering how the
Board should assist the Company to implement Group policies and manage risks relating to occupational and community health and safety,
environmental performance and compliance, social performance, stakeholder relations and political risk. The ESG Committee also provides
advice and guidance on relevant aspects of the licence to operate including strategies on security, procurement, tax and human resources.
The ESG Committee has a rotating chair between its independent members and comprises Edward Bickham, Kate Harcourt (Chairwoman)
and Edward Montgomery.
Further details regarding the roles and responsibilities of these committees can be found on the Company’s website.
The Company has adopted, and will maintain, governance structures and processes that are fit for purpose. This governance structure may
evolve over time in parallel with the development of the Company and therefore any fluctuation in its objectives, strategy and
business model.
55
ANNUAL REPORT + ACCOUNTS 2020 GOVERNANCE
COMMUNICATION WITH SHAREHOLDERS AND OTHER RELEVANT STAKEHOLDERS
The Company seeks to engage regularly with shareholders, including through post-RNS announcements, conference calls and the
AGM. The Company welcomes engagement with shareholders throughout the year either in person, by telephone or by email. A range
of corporate information, including all Company announcements, historical annual reports and other governance-related material, is also
available to shareholders, investors and the public on the Company’s website.
This Corporate Governance Report has been approved by the Board and signed on its behalf by:
Russell King
Non-Executive Chairman
26 May 2021
56
HUMMINGBIRD RESOURCES audit committee report
Dear Shareholder,
I am pleased to present you the Audit Committee Report for the financial year ended 31 December 2020.
The Group had to respond to the unprecedented challenges caused by the COVID-19 pandemic, and I would like to comment our people
and partners for their dedication and work during this period. The Group have seen significant costs pressures throughout 2020 because of
this pandemic caused by supply chain bottlenecks as well as higher transport costs of its critical spares and parts.
COMPOSITION
The Audit Committee consists of two Non-Executive Directors. Ernie Nutter and myself. The Board consider that the Committee as a whole
has the necessary competence relevant to the sector in which the Company operates.
The Audit Committee held 6 meetings in 2020 and all members attended.
RESPONSIBILITY
Detailed duties and responsibilities of the Committee are set out in its Terms of Reference, which was approved by the Board of Directors.
The primary function of the Committee is to assist the Board of Directors of the Company in fulfilling its responsibilities with regard to
financial reporting, external and internal audit, risk management and controls and to oversee various policies including whistleblowing,
anti-corruption and bribery.
In the past financial year, the Committee reviewed and approved the interim and year-end financial results. The Committee met with
the auditors to review and approve their audit plan, received their findings and monitored the integrity of the financial statements of the
Company. During the year, the Committee also worked closely in ensuring adherence to the anti-bribery protocols as well as monitoring the
maintenance of sound internal controls and risk management across the Group. The Chief Financial Officer provided regular updates to the
Committee throughout the year and the Committee was satisfied with the effectiveness of internal controls and risk mitigation.
EXTERNAL AUDIT
The Audit Committee reviewed and recommended to the Board the appointment and remuneration of the Company’s external auditor,
and is satisfied that the current auditor, RSM UK Audit LLP maintains its objectivity and independence in carrying out audit work.
Accordingly, the Committee recommended to the Board that RSM UK Audit LLP be re-appointed for the next financial year.
Significant issues related to the financial statements
The Committee reviewed the key judgements applied to a number of significant issues in the preparation of the financial statements.
The review included consideration of the following:
Going concern
As set out in note 3, the annual financial statements have been prepared on a going concern basis. In making an assessment on going
concern, the Group has prepared cash flow forecasts based on estimates of key variables including production, gold price, operating costs
and capital expenditure through to December 2022 that supports the conclusion of the Directors that there is sufficient funding available
to meet the Group’s anticipated cash flow requirements to this date. These cashflow forecasts are subject to a number of risks and
uncertainties, in particular the ability of the Group to achieve the planned levels of production. The Committee reviewed and challenged the
key assumptions used by management in its going concern assessment, as well as the scenarios applied and risks considered, including
the risks associated with COVID-19.
Based on its review, the Committee has reasonable expectation that the Group has adequate resources to continue operating for the
foreseeable future and hence the Committee considers that the application of the going concern basis for the preparation of the Financial
Statements is appropriate.
57
ANNUAL REPORT + ACCOUNTS 2020
GOVERNANCE
Exploration and evaluation (E&E) assets
As a result of a deficit arising between the Group’s market value (capitalisation) against book value (net assets) at 31 December 2020,
the Group conducted an assessment of impairment over E&E assets. As set out in note 4, in respect of E&E assets, the Group considers
there to be two cost pools, being the whole of Liberia and whole of Mali, and therefore aggregates assets in respect of each for the
purposes of determining whether impairment of E&E assets has occurred. Following the signing of the earn-in agreement with ARX/Pasofino
who continue to progress the project, the recoverability of the Liberian cash generating was assessed using a combination of two methods.
The first was through the valuation of Pasofino as management believes most of the value of this company is driven from the earn-in
agreement on the Dugbe Project, and therefore believe the value of Pasofino provides an indication of the value of Dugbe. The second
method continued to consider the recoverable amount of the Liberian cash generating unit (“CGU”), with reference to the 2013 Preliminary
Economic Assessment (‘PEA’). Both these methods proved that no impairment loss was to be recognised for the year ended 31 December
2020. Having considered the recoverable amount of the Malian CGU, with reference to the Group’s latest budget and life of mine (“LOM”)
plan for the Group’s Yanfolila Gold Mine in Mali, no impairment loss was recognised for the year ended 31 December 2020. Further
assessment was done in respect of the newly acquired Kouroussa Gold Project in Guinea, with reference to the most recently available
economic information and its current life of mine estimates. There are currently no separately identified E&E assets in Guinea, and therefore,
no impairment loss was recognised for the year ended 31 December 2020. There is a possibility that changes in circumstances will alter
these projections, which may impact on the recoverable amount of the assets.
Having considered the above, the Committee found the Group’s assessment of impairment in respect of E&E assets to be appropriate.
Property, plant and equipment
As a result of a deficit arising between the Group’s market value (capitisation) against book value (net assets) at 31 December 2020,
the Group conducted an assessment of impairment over property, plant and equipment. As set out in note 4, determination as to whether,
and by how much, an asset or cash generating unit (“CGU”) is impaired involves management estimates on highly uncertain matters such
as; gold price, discount rates used in determining the estimated discounted cash flows of CGU, foreign exchange rates, the level of proved
and probable reserves and measured, indicated and inferred mineral resources that may be included in the determination of fair value less
cost to dispose (“fair value”).
The principal CGU, to which mine property, plant and equipment relates is the Group’s Yanfolila Gold Mine in Mali (operating segment).
In determining the recoverable amount of CGU at 31 December 2020, future cash flows were discounted using rates based on the Group’s
estimated weighted average cost of capital. Operating and capital cost assumptions are based on the Group’s latest budget and life of mine
(“LOM”) plan.
The table below summarises the key assumptions used in the carrying value assessments:
Gold price ($ per ounce):
Discount rate % (post tax):
2020: $1,700
2019: $1,350
2020: 21.47%
2019: 19.6%
Commodity price and foreign exchange rates were estimated with reference to external
market forecasts. The rates applied to the valuation had regard to observable market
data.
In determining the fair value of CGU, the future cash flows were discounted using rates
based on the Group’s estimated real weighted average cost of capital, with an additional
premium applied having regard to the geographic location of the CGU and Company
size.
Operating and capital costs:
LOM operating and capital cost assumptions are based on the Group’s latest budget and life of mine plan.
Based on the recoverable amount of the CGU, no impairment loss was recognised for the year ended 31 December 2020. There is a
possibility that changes in circumstances will alter these projections, which may impact on the recoverable amount of the assets.
Having considered the above, the Committee found the Group’s assessment of impairment in respect of property, plant and equipment
to be appropriate.
Other receivables
As set out in note 4, included in other receivables is an amount of CFA 4,968,387,000, approximately $9,302,000 (2019: $10,317,000),
due from the Government of Mali, arising on 2 February 2017 when the Government of Mali exercised its right to acquire an additional 10%
of Societe Des Mines De Komana SA (which would take its total interest in Societe Des Mines De Komana SA to 20%). During the year CFA
1,656,130,505, approximately $1,883,000 was received from the Government of Mali in relation to this receivable. The Group remains in
discussions with the Government of Mali as to the timing and mechanism of payment of the remaining balance. The relevant shares will not
be issued until the mechanism on payment of the remaining balance has been agreed.
58
HUMMINGBIRD RESOURCES The Group considers the receivable to be ‘credit-impaired’ as part of it remains unpaid more than 1 year since the Government of Mali
exercised its right. The Group has reassessed the recoverability of the balance having considered multiple scenarios on the manner,
timing, quantum and probability of recovery on the receivable, the recent part payment together with movements in exchange rates.
This assessment resulted in reversal of the lifetime expected credit loss of $397,000 as at 31 December 2020. This takes the net lifetime
expected credit loss for the full balance to $1,395,000 as at 31 December 2020. The allowance for lifetime expected credit losses
assessment requires a significant degree of estimation and judgement.
Having considered the above, the Committee found the Group’s assessment of impairment (on application of IFRS 9 ‘Financial Instruments’)
in respect of the receivable due from the Government of Mali to be appropriate.
Rehabilitation provision
The Group makes full provision for the future cost of rehabilitating mine sites and related production facilities on a discounted basis at the
time of developing the mines and installing and using those facilities. The rehabilitation provision represents the present value of rehabilitation
costs relating to mine sites, which are expected to be incurred up to 2029. The Group assesses its mine rehabilitation provision at each
reporting date. Significant estimates and assumptions are made in determining the provision for mine rehabilitation as there are numerous
factors that will affect the ultimate amount payable. These factors include estimates of the extent and costs of rehabilitation activities,
technological changes, regulatory changes, cost increases as compared to the inflation rates and changes in discount rates. These
uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision at reporting date represents
management’s best estimate of the present value of the future rehabilitation costs required.
Approximately $350,000 of liabilities were acquired as part of the Kouroussa Gold Project during the year. Management assessed this to
be reasonable at the acquisition date and further assessment of the amount will done as development progresses in Guinea.
Having considered the above, the Committee found the Group’s estimate and assumptions therein to be appropriate.
Kouroussa Asset Purchase
On 1 September 2020 Hummingbird Resources plc, through its wholly owned subsidiary, Trochilidae Resources Limited, acquired 100%
of the shares of Cassidy Gold Guinea SA, which held the Kouroussa Gold Project, located in Guinea from Cassidy Gold Corp, a company
incorporated in British Columbia, Canada. The Directors consider it to be an asset purchase under IFRS 3 as opposed to a business
combination due the fact that on date of acquisition, Cassidy did not have any mining permit and further studies were required ahead of
a construction decision.
The Company was awarded the mining licences in May 2021.
The consideration for this purchase is as follows:
■
■
Initial consideration of £10 million, which has been satisfied through the issue of 35,248,441 new Ordinary Shares in the Company
(“Initial Consideration”).
Deferred consideration of £10 for every ounce of gold reserve published (or processed if not included in a reserve) in excess of
400,000 ounces (subject to a maximum of 1,000,000 ounces, or £6 million)
The vendors retain a 2% net smelter royalty on all gold sales by or on behalf of the Company over and above the first 200,000 ounces of its
production and sales, subject to a maximum of 2.2 million ounces of production and sales.
The consideration above was contingent on a mining license being granted, with the shares held in treasury until such a time. The mining
licence was granted in May 2021.
Having considered the above, the Committee considered that managements judgments and estimates and the related treatment of the
asset purchase to be appropriate.
Liberia Earn-In Agreement
On 4 June 2020 the Company announced an earn-in with ARX Resources Limited (“ARX”) in respect of the Dugbe Gold Project in Liberia
(“Dugbe”). The earn-in agreement requires ARX to complete a Definitive Feasibility Study (“DFS”), carry out a significant exploration
programme and cover all project costs over the 2 year earn-in period (the “Earn-in”). The Earn-in entitles ARX to earn up to a 49% interest in
the Dugbe.
The Earned Interest of 49% is made up as:
a.
39% of the equity securities of Hummingbird Resources Liberia.
b.
all of Hummingbird Resources plc’s economic rights in 5.1% of the equity securities of Hummingbird Resources Liberia held by
Hummingbird Resources plc; and
c.
49% of any loan advanced to Hummingbird Resources Liberia or its subsidiaries by Hummingbird Resources plc and its affiliates.
This was approximately $50.6 million on 30 September 2020.
59
ANNUAL REPORT + ACCOUNTS 2020 GOVERNANCE
All the money that ARX spend in Dugbe is non-refundable should they decide not to pursue the earn-in.
The amount advanced to Dugbe by Pasofino has been recognised as $Nil in the statement of financial position. This is because despite the
spend, this amount was not spent by the Company and therefore no recognition of these expenditure in the Company’s financial position for
the money spend by Pasofino as it is not refundable.
Having considered the above, the Committee found the Group’s estimate and assumptions therein to be appropriate.
Deferred Tax
As set out in note 20 management assessed the taxation situation of the Group. The taxation of the Group’s operations in Mali are aligned
to the Mining Code of Mali 1999 under which tax is charged at an amount not less than 1% of turnover and not more than 30% of taxable
profits.
Following a review of the future profitability of the Malian subsidiary, in light of the relatively high gold price environment being experienced,
deferred tax assets of $684,000 were recognised at 31 December 2020 in respect of the Malian subsidiary. These assets were previously
not recognised due to unpredictability and uncertainty of their timing. The deferred tax has arisen on the temporary differences between the
carrying value of assets and tax written down value of assets.
No deferred tax assets have been recognised in respect of the remaining deferred tax assets of $15,145,000, as the recovery is dependent
on the future profitability, the timing and the certainty of which cannot reasonably be foreseen.
Following the acquisition of Kouroussa Project in Guinea, and in light of a new mining company being required for the mining permit, and
although it should be possible, but not certain, to transfer historic costs to the new company, management have assumed that any losses
within Cassidy Gold SA will not be available for future profits. This position will be assessed as the new mining licence is granted and when
the transfer of balances between the two entities is approved. Hence no deferred tax assets and liabilities have been recognised with
respect to Guinea.
Having considered the above, the Committee found the Group’s estimate and assumptions therein to be appropriate.
Looking forward
In the coming financial year, in addition to ongoing duties, the Committee will review the cost and benefit of changes to the internal control
and internal audit capability and will make recommendations to the Board accordingly.
Approval
This Audit Committee Report has been approved by the Committee and signed on its behalf by:
David Straker-Smith
Chair of the Audit Committee
26 May 2021
60
HUMMINGBIRD RESOURCES remuneration committee report
This report is for the year ended 31 December 2020. It sets out the remuneration policy and the detailed remuneration for the Executive and
Non-Executive Directors of the Company. As an AIM-quoted Company, the information is disclosed to fulfil the requirements of AIM Rule 19.
Hummingbird Resources plc is not required to comply with the Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013. The information is unaudited except where stated.
Dear Shareholder,
I am pleased to introduce the Directors’ Remuneration Report for the 2020 financial year. This letter introduces the report, outlines the major
decisions on Directors’ remuneration during the year and explains the context in which these decisions have been taken. Later in this report
we set out information on our remuneration policy and information on remuneration during the year.
During the year, the Company carried out a review led by external remuneration advisors of the appropriate balance of short-term incentives
and long-term share-based incentives and retention structures for Directors and key employees in light of the Company’s potential
development paths. Following this review, from 2021 the Company has adopted a new and more standard approach to senior team
incentives comprising an annual cash bonus plan and long-term share incentive awards. Our new approach is summarised below with
greater detail set out later in this report.
AIMS OF THE REMUNERATION COMMITTEE
Our overall aim is to determine the framework and policy for the remuneration of the Company’s employees including the executive directors.
We aim to align remuneration with delivery of long-term value for our shareholders and stakeholders.
The terms of reference of the Remuneration Committee are set out below:
■
Determine and agree with the Board the Company’s overall remuneration principles and policy for the chairman and the executive
directors as well as considering policies for the rest of the employees below the board and executive team.
■
■
■
Approve the principles, objectives and headline targets for any performance-related bonus or incentive schemes.
Prepare an annual remuneration report to shareholders to show how the policy has been implemented.
Review and approve any termination payment for executive directors such that these are appropriate for both the individual and the
Company.
The Company aims to offer competitive salary packages that attract, retain, and motivate highly skilled individuals and align remuneration
packages with performance related metrics.
The Remuneration Committee consists of myself as the Chairman and Ernie Nutter. The Committee met formally 4 times in 2020 and all
committee members attended the meetings. Additionally, the Committee met a number of times informally to provide oversight, support and
guidance as required. The Chief Executive Officer and Chief Financial Officer are invited to attend meetings of the Committee. None of the
Committee members have any personal financial interest, conflicts of interests arising from cross directorships, or day-to-day involvement in
running the business.
PERFORMANCE FOR THE YEAR
Despite the many challenges in the year, the Group continued to operate and explore, repaid approximately US$30m of debt and ended
the year in the targeted net cash position.
61
ANNUAL REPORT + ACCOUNTS 2020
GOVERNANCE
HIPPO 2020
For 2020, the Company operated the HIPPO 2020 incentive scheme for its Executive Directors and other senior managers in line with the
incentives provided in previous years. Under this scheme, which was announced on 27 February 2020, Executive Directors could receive
awards up to 250% of their base salaries payable half in cash and half in shares (structured as restricted stock units, RSUs), with 50% of
any amounts due in cash and RSUs being paid in the first quarter of 2021, 25% in December 2021 year and 25% in December 2022.
Targets covered key performance areas: production, AISC, net cash, safety, and individual performance.
For 2020, the Company did not meet its demanding AISC or production targets. However, the Company did meet the target of being net
cash positive. Taking into account Company and individual performances, the scheme paid out at 50% of the potential maximum for the
CEO and the CFO. Amounts awarded in cash and shares will vest in three tranches over the period to 31 December 2021 dependent on
continued employment with the Company and malus provisions.
NEW INCENTIVES FOR 2021
As referred to above, the Company carried out a comprehensive review of its incentive arrangements during 2020, with the objective of
moving to a more industry standard incentive structure with an appropriate balance of short term and long-term incentive and retention
structures in light of the Group’s potential development paths.
The Company appointed h2glenfern Remuneration Advisory to carry out this review and provide advice to the Committee and the board.
Following this review, the Company has adopted a discretionary short-term cash-based scheme based on both corporate and personal
targets (with awards being paid out over 2 years subject to continued employment and malus provisions), together with a new equity based
Long Term Incentive Plan (“2021 LTIP”), intended to better align participants with shareholders to create shareholder value over the medium
to long term. The maximum amounts payable under the new arrangements have not increased from the maximum incentive payment
under HIPPO.
Details of how and annual discretionary short-term cash-based scheme and the Long-Term Incentive Plan will operate in 2021 are set out
later in this report.
NON-EXECUTIVE DIRECTOR REMUNERATION
The Company has also made changes to Non-executive Director remuneration which are detailed later in this report.
David Straker-Smith
Chair of the Remuneration Committee
26 May 2021
62
HUMMINGBIRD RESOURCES Remuneration Policy
Basic salary and benefits for Executive Directors are reviewed on an annual basis and any changes made to the structure of these are
based on a combination of individual performance and market conditions. Bonus awards are assessed on overall business and individual
performance. Executive Directors and senior management remuneration packages are heavily linked to performance criteria to incentivise
daily conduct in alignment with the best interests of our shareholders.
Executive Directors are entitled to a pension allowance at 10% of base salary, medical and life insurance.
Annual and long term share based incentives are described elsewhere in this report.
2014 Founders Equity Alignment Plan (“FEAP”)
On 1 July 2014, the shareholders approved the adoption of a long-term incentive plan for the purpose of retaining and motivating the
executive directors to deliver the proposed new strategy. The FEAP was rebased on 21 June 2016 as part of the £49.5m fundraise
carried out at 22p to recapitalise the Company. Participants in the FEAP are limited to existing executive directors. Allocations of the FEAP
are proposed by the Principal Director (currently the CEO) and ratified by the board. As at 31 December 2019 no allocation had been
proposed. The FEAP will issue shares to the participants for adding material long term shareholder value and therefore align the interest
of the executives with the shareholders by providing a strong incentive for the executives to drive shareholder value. The value that may
be delivered to executives and the dilution of shareholders are commensurate with levels applying in schemes implemented by industry
comparators.
Under the FEAP, shares may be distributed to participants depending upon the value that has been added to shareholders over the vesting
period. No value will accrue to the FEAP if the growth in shareholder value is less than 50% of the market capitalisation of Hummingbird
on 21 June 2016. If the growth in shareholder value is over 50%, a proportion of value added to shareholders will accrue to the FEAP,
increasing progressively, starting at 5% of the value added to shareholders up to a maximum of 15% of the value added to shareholders
above 150%. Shares with a value equal to the value accrued in the FEAP will be issued on vesting or the value can be settled in cash at the
Company’s option. There is also the flexibility to allow early payments under the FEAP where assets or companies are disposed of and value
has been added exceeding 50% on the same principles.
Malus
Both annual bonus and long-term incentive awards are subject to malus provisions as detailed elsewhere in this document.
Executive Directors’ service contracts and payments for loss of office
The CEO and CFO have rolling service contracts dated 1 June 2014 and 2 August 2010, with notice periods of 12 months and 3 months,
respectively. Our approach to remuneration in each of the circumstances in which an Executive Director may leave is determined by the
Remuneration Committee in accordance with the terms of the service contracts and any other relevant agreements including incentive
schemes.
Non-Executive Directors’ letters of appointment
The Non-Executive Directors do not have service contracts but instead have letters of appointment which set out their responsibilities and
are subject to a 1-month notice period.
Annual report on remuneration in year
This section sets out details of remuneration in 2020.
63
ANNUAL REPORT + ACCOUNTS 2020 GOVERNANCE
2020 SUMMARY OF DIRECTORS’ TOTAL REMUNERATION (AUDITED)
DE Betts
TR Hill
RJ King
SA Betts
RD Striker-Smith
GE Nutter
AA Roux
31 DECEMBER 2020
OTHER
BENEFITS/
COMMITTEE
FEES2
$’000
DEFERRED
BONUS PAID1
$’000
BASE SALARY
$’000
486
310
91
64
64
64
64
21
21
13
12
12
43
47
1,143
169
143
92
–
–
–
–
–
235
31 DECEMBER 2019
OTHER
BENEFITS/
COMMITTEE
FEES2
$’000
DEFERRED
CONSTRUCTION
BONUS PAID1
$’000
BASE SALARY
$’000
TOTAL
650
423
104
76
76
107
111
473
298
91
64
64
64
64
29
29
10
8
10
40
40
1,547
1,118
166
TOTAL
$’000
742
519
101
72
74
104
104
1,716
240
192
–
–
–
–
–
432
In addition to the amounts above, the Directors are accruing potential benefits under incentive schemes as set out in note 25.
1. Represents the vested cash portion of the HIPPO 2018 and HIPPO 2016 performance plans, the plans set up to incentivise management. Further details on the performance plans and
related vesting conditions are disclosed in note 26.
2. Other benefits and committee fees include pension allowances, medical and life insurances for DE Betts and TR Hill, additional benefits for attending board meetings and US$30,000
annual fee for GE Nutter and AA Roux for membership of the Technical Advisory Committee.
SALARY AND FEES
The salaries of the CEO and CFO in the year were £350,000 and £225,000, respectively.
The Chairman’s annual fee was £70,000, the base fee of the non-executive directors was £50,000. Members of the Technical Advisory
Committee receive an additional committee fee of US$30,000 per annum.
HIPPO 2020
For 2020, the company operated the HIPPO 2020 incentive scheme for its Executive Directors and other senior managers in line with the
incentives provided in previous years. Under this scheme, which was announced on 27 February 2020, Executive Directors could receive
awards up to 250% of their base salaries payable half in cash and half in shares (structured as restricted stock units, RSUs), with 50% of any
amounts due being paid in the first quarter of 2021, 25% in December 2021 year and 25% in December 2022. Targets covered three key
performance areas: production, AISC, net cash, safety, and individual performance.
For 2020, the Company did not meet its demanding AISC or production targets. However, the Company did meet the target of being net
cash positive. The Remuneration Committee approved awards to Executive Directors and certain senior management of approximately 35%
of the maximum amount with the balance lapsing, reflecting the demanding nature of the targets and the Company’s track record of aligning
management and shareholder interests.
Taking account of company and individual performance, the scheme paid out at 50% of the potential maximum for the CEO, corresponding
to a potential cash bonus of £218,750 and the award of 1,093,750 RSUs and 50% for the CFO, corresponding to a potential cash bonus
of £140,750 and the award of 703,750 RSUs. These amounts awarded will vest in three tranches over the period to 31 December 2022
dependent on continued employment with the Company.
DIRECTORS’ INTERESTS IN SHARES
The Directors beneficial interests in the ordinary shares of the Company were as follows:
APPOINTMENT DATE
RESIGNATION DATE
NUMBER OF SHARES AT
31 DECEMBER 2020
NUMBER OF SHARES AT
31 DECEMBER 2019
DE Betts 1 & 2
TR Hill
SA Betts 1 & 3
RJ King
RD Straker–Smith
AA Roux
GE Nutter
30 October 2005
17 July 2012
28 April 2006
17 November 2014
24 May 2017
30 April 2018
30 April 2018
–
–
–
–
–
–
–
5,049,149
208,235
1,498,601
303,955
–
–
–
4,949,149
148,235
712,542
303,955
–
–
–
1. The 315,101 shares held by Stephen Betts & Sons Limited, and 180,000 shares held by Stephen Betts & Sons Limited (Self-Administered) Pension Scheme are included in both SA
Betts and DE Betts.
2. DE Betts’s interest consists of 4,554,048 shares held by DE Betts, 315,101 shares held by Stephen Betts & Sons Limited, and 180,000 shares held by the Stephen Betts & Sons
Limited (Self-Administered) Pension Scheme.
3. SA Betts’s interests consist of 733,919 shares held by SA Betts, 292,682 shares held by Caroline Betts, 292,000 shares held by Stephen Betts & Sons Limited, and 180,000 shares
held by the Stephen Betts & Sons Limited (Self-Administered) Pension Scheme.
64
HUMMINGBIRD RESOURCES DIRECTORS’ INTERESTS IN SHARE OPTIONS
The Directors’ interests in the share options and RSUs of the Company at 31 December 2020 were as follows:
PLAN TYPE/
YEAR
RSUs AT
1 JAN 2020
GRANTED
EXERCISED
DE Betts
DE Betts
DE Betts
DE Betts
DE Betts
DE Betts
DE Betts
DE Betts
DE Betts
DE Betts
DE Betts
DE Betts
DE Betts
DE Betts
TR Hill
TR Hill
TR Hill
TR Hill
TR Hill
TR Hill
TR Hill
TR Hill
TR Hill
TR Hill
TR Hill
TR Hill
TR Hill
TR Hill
SA Betts
SA Betts
SA Betts
Total
2010
2013
2013
2013
HIPPO
2016
HIPPO
2016
HIPPO
2016
HIPPO
2016
HIPPO
2018
HIPPO
2018
HIPPO
2018
HIPPO
2020
HIPPO
2020
HIPPO
2020
2010
2013
2013
2013
HIPPO
2016
HIPPO
2016
HIPPO
2016
HIPPO
2016
HIPPO
2018
HIPPO
2018
HIPPO
2018
HIPPO
2020
HIPPO
2020
HIPPO
2020
2010
2013
2013
1,125,000
217,000
217,000
150,000
426,136
426,136
426,136
426,137
683,594
341,797
341,797
–
–
–
–
–
–
–
–
–
–
–
– 1,093,750**
–
–
546,875**
546,875**
67,500
100,500
100,500
100,000
340,909
340,909
340,909
340,909
439,844
219,922
219,922
–
–
–
–
–
–
–
–
–
–
–
–
–
–
703,750
351,875
351,875
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
337,500
33,000
33,000
– 337,500***
33,000***
–
33,000***
–
LAPSED
RSUs AT
31 DEC 2020
– 1,125,000
–
217,000
–
217,000
–
150,000
–
426,136
EXERCISE
PRICE
DATE OF GRANT
FIRST DATE OF
EXERCISE
FINAL DATE OF
EXERCISE
£0.22 26/10/2010 24/12/2011 26/10/2020*
£0.22 05/12/2013 01/06/2014 01/06/2024
£0.22 05/12/2013 01/06/2015 01/06/2025
£0.22 05/12/2013 10/04/2020 10/04/2029
£0.01 30/09/2016 19/12/2017 19/12/2022
–
–
–
426,136
426,136
426,137
£0.01 30/09/2016 30/06/2019 30/06/2023
£0.01 30/09/2016 19/12/2019 19/12/2023
£0.01 30/09/2016 19/12/2020 19/12/2024
455,729
227,865
£0.01 30/04/2019 27/02/2020 27/02/2025
227,865
113,932
£0.01 30/04/2019 31/12/2020 31/12/2025
227,865
113,932
£0.01 30/04/2019 31/12/2021 31/12/2026
– 1,093,750
£0.01 27/02/2020 31/03/2021 27/02/2026
–
–
–
–
–
–
–
–
–
546,875
546,875
67,500
100,500
100,500
100,000
340,909
340,909
340,909
340,909
£0.01 27/02/2020 31/12/2021 31/12/2026
£0.01 27/02/2020 31/12/2022 31/12/2027
£0.22 26/10/2010 24/12/2011 26/10/2020*
£0.22 05/12/2013 01/06/2014 01/06/2024
£0.22 05/12/2013 01/06/2015 01/06/2025
£0.22 05/12/2013 10/04/2020 10/04/2029
£0.01 30/09/2016 19/12/2017 19/12/2022
£0.01 30/09/2016 19/12/2019 30/06/2023
£0.01 30/09/2016 19/12/2018 19/12/2023
£0.01 30/09/2016 27/02/2020 19/12/2024
293,229
146,615
£0.01 30/04/2019 27/02/2020 27/02/2025
146,615
73,307
£0.01 30/04/2019 31/12/2020 31/12/2025
146,615
73,307
£0.01 30/04/2019 31/12/2021 31/12/2026
–
–
–
–
–
–
703,750
351,875
351,875
£0.01 27/02/2020 31/03/2021 27/02/2026
£0.01 27/02/2020 31/12/2021 31/12/2026
£0.01 27/02/2020 31/12/2022 31/12/2027
–
–
–
£0.22 26/10/2010 24/12/2011 26/10/2020
£0.22 05/12/2013 01/06/2014 01/06/2024
£0.22 05/12/2013 01/06/2015 01/06/2025
7,796,057
3,595,000
403,500 1,497,918 9,489,640
* The expiry date of these RSUs has been extended due to close periods, until the start of the open period.
** 50% of these expired post year end, refer to note 31.
*** Shares retained by SA Betts on exercise.
65
ANNUAL REPORT + ACCOUNTS 2020 GOVERNANCE
2021 LOOKING AHEAD
SALARIES
There was no change in the salaries of the CEO or CFO for 2021.
ANNUAL BONUS
Under the new policy, Executive Directors will participate in the annual discretionary bonus plan with a maximum potential opportunity of
125% of salary payable in cash 50% in Q1 2022, 25% in December 2022 and 25% in December 2023 (subject to continuous employment
and malus provision). Half of the bonus will be based on Company performance including production, AISC / Free Cash flow, Strategic
growth, Kouroussa project, ESG / Safety. Half of the bonus will be based on personal targets.
The scheme is completely discretionary. Malus conditions apply to the annual bonus in certain circumstances including in the event of acts
or omissions which justify summary or dismissal represents gross misconduct, material failures of risk management, conduct resulting in
significant losses, failure to meet appropriate standards of fairness and propriety, or misstatement of financial information (whether or not
audited).
LONG TERM INCENTIVE AWARDS
Awards will be made under the new 2021 Long Term Incentive Plan approved by the board on 27 January 2021.
Executive Directors will also receive an award of performance and restricted shares up to a notional maximum of 125% of their base salaries.
Two thirds of these awards are performance shares subject to total shareholder return performance conditions and one third are restricted
share awards, subject only to continued employment and having no performance conditions. Awards vest (where applicable subject to the
meeting of performance conditions) three years from award. In calculating the value of the awards within the 125% limit, the value of the
RSUs is doubled, in line with best practice guidance, reflecting the absence of performance conditions. As such, the total actual award has
a potential value at award of 94% of the Executive Director’s base salary.
One third of the award is subject to an absolute compound annual total shareholder return performance condition with 25% of the award
vesting at 8% annual Total Shareholder Return (“TSR”) and full vesting at 18% annual TSR and above (and straight-line vesting for TSR
performance between these points). One third of the award is subject to relative TSR performance against the S&P Commodity Producers
Gold Index with 25% of the award vesting at the index and full vesting at 5% outperformance of the index.
The award of restricted shares without performance conditions will provide long-term alignment with shareholders, without the complexities
of performance conditions. The Committee is conscious that having even a small portion of restricted shares although common
internationally, is less conventional for UK quoted companies but sees it is a small but significant mitigation of the impact of cyclicality.
In calculating values against the LTIP limit, the value of restricted share awards will be multiplied by two to reflect that they do not have
performance conditions attached in line with best practice.
The share price used to determine the number of awards was 21.54p, being the 5-day volume weighted average price at the end of
February 2021 (shortly after the Q4 2020 Production and 2021 Outlook announcement on 3 February 2021). Total awards to be granted
to the CEO and CFO, are 1,597,494 and 1,026,960, respectively.
Malus conditions apply for three years from the date of the vesting of the award in certain circumstances including if the participant is
responsible for conduct resulting in significant losses, failure to meet appropriate standards of fitness and proprietary, material wrong doing,
acting in a manner likely to bring the group into material disrepute or materially adverse to the interests of the group, breach of contract that
is potentially a fair reason for disposal, misstatement of financial information which was taken into account in determining whether an Award
should be made, determining the size and nature of an Award or assessing the extent to which any Performance Condition was satisfied at
the end of the Performance Period and in the event of a material failure of risk management.
The 2021 LTIP rules contain provisions to reduce amounts which vest to the extent and amount that an individual receives value in cash or
shares under the FEAP in that year.
66
HUMMINGBIRD RESOURCES NON-EXECUTIVE DIRECTOR REMUNERATION
For 2021, no changes have been made to the base fees for the Chairman and the Non-executive Directors.
As part of the review conducted, h2glenfern Remuneration Advisory provided recommendations in respect of Non-executive director
remuneration.
The following changes have been made to Non-executive Director remuneration:
(a)
Effective from 1 February 2021, due to the additional time commitment and responsibility of board committees, additional fees will
be paid for chairing and being a member of both the audit and remuneration committees of £7,500 and £5,000 respectively.
(b)
In recognition of the significant experience and the high level of personal commitment of the Non-executive Directors, each
Non-executive Director (including the Chairman) will receive an annual deferred share award with a value of £25,000, vesting one year
from award date. These awards must be retained until the individual ceases to hold office. For the year to 31 December 2021, each
Non-executive will be awarded 116,063 deferred shares (total 580,315).
(c)
Each Non-executive will be able to elect to receive up to £50,000 of their cash fees in shares annually.
67
ANNUAL REPORT + ACCOUNTS 2020 GOVERNANCE
board of directors
RUSSELL KING
Non-Executive Chairman
Russell is a Non-Executive Director of Ricardo plc and an Independent Non-Executive of
BDO LLP, and until April 2020, was also a Senior Independent Director of Spectris plc.
Between 2010 and 2013 he was a Senior Advisor to RBC Capital Markets on Metals and
Mining. Prior to this, Russell served as Chief Strategy Officer at Anglo American plc where he
had global responsibility for strategy, business development, government relations, safety and
sustainable development. He was also a member of Anglo American’s executive committee for
eight years. Additionally, Russell was Senior Independent Non-Executive Director of Aggreko plc,
the FTSE 100 temporary power company, from February 2007 to April 2017.
DANIEL EDWARD BETTS
Chief Executive Officer
Daniel founded Hummingbird in November 2005 and has run the Company since its inception.
After graduating from Nottingham University, he worked for Accenture Management Consultants
until he joined the Betts family business in 2000. Founded in 1760, the family business is the
oldest privately-owned gold bullion smelters and refiners in the country, and it has a long history
of trading across the world and dealing in all areas of the precious metal industry. Since founding
Hummingbird, Dan has successfully taken the Company from a grassroots exploration business
to a listed, producing mining firm.
THOMAS HILL
Finance Director & Company Secretary
Thomas joined the Company as Chief Financial Officer in September 2010 and was appointed
as Finance Director in July 2012. Prior to this Thomas was a senior manager within BDO LLP’s
natural resources department, where he worked extensively with quoted mining and exploration
companies and was involved with numerous flotations and other corporate transactions. He has
a metallurgy, economics and management degree from Trinity College, Oxford and qualified as a
chartered accountant with BDO LLP in 2001.
68
HUMMINGBIRD RESOURCES
STEPHEN ALEXANDER BETTS
Non-Executive Director
Stephen co-founded Hummingbird Resources in November 2005. He has over 40 years’
experience in trading with gold and related businesses in developing countries, having
established several businesses in West Africa during his career. He is the Chairman of the
Stephen Betts group of companies. The family business has over 250 years’ history in smelting,
refining and bullion dealing.
DAVID STRAKER-SMITH
Non-Executive Director
David Straker-Smith is a Director of CrossBorder Capital Ltd, which he joined in April 1999.
CrossBorder Capital is a London-based investment research and advisory firm regulated by the
FCA. Previously, he worked at ING Barings Securities Ltd from 1996 to 1999, where he was
Head of Equity Sales for Eastern Europe, and at Gerrard & National Holdings plc from 1980 until
1995, a firm which operated as a discount house, futures broker, money broker, stockbroker
and fund manager. During his time at Gerrard & National Holdings plc, he became a main Board
Director and active Fund Manager. He is a Director of New Vision Management Limited, a Dublin
regulated management company, and a Director of Nomad Energy UK Limited. David serves as
Chairman of the Audit and Remuneration Committees.
ATTIE ROUX
Non-Executive Director
Adriaan (Attie) Roux is a Metallurgical Engineer with over 40 years’ Operational, Technical and
Executive Management experience in the Mining Industry. Attie was previously the COO of
Endeavour Mining where he was instrumental in its development and growth. He has been
internal director in a number of companies such as Anglogold Ashanti and Endeavour. He is a
Registered Professional with the SA Council for Natural Scientific Professions. Attie also serves
as Chairman of the Technical Advisory Committee.
ERNIE NUTTER
Non-Executive Director
Ernie is a highly regarded mining analyst, formerly with one of the world’s largest money
managers, Capital Group, from 2004 until his retirement in 2017. Prior to this, he spent over
13 years with the Royal Bank of Canada where he was Managing Director of RBC Capital
Markets, Director of RBC’s Global Mining Research team and former Chairman of RBC
Dominion Securities’ (now RBC Capital Markets) Strategic Planning Committee. Ernie holds
a Bachelor of Science degree in Geology from Dalhousie University and sits on the Audit,
Remuneration and Technical Advisory Committees.
69
ANNUAL REPORT + ACCOUNTS 2020 GOVERNANCE
DIRECTORS’ REPORT
The Directors present their report on the affairs of the Group, together with the financial statements and Auditor’s Report for the year ended
31 December 2020.
PRINCIPAL ACTIVITIES
The Group’s principal activity is the exploration, evaluation and development of mineral projects, principally gold, focused in West Africa.
The subsidiary and associated undertakings principally affecting the profit or net assets of the Group in the year are listed in note 15 to the
financial statements.
CORPORATE GOVERNANCE
The Group has adopted to the Quoted Companies Alliance (QCA) Code as set out in the United Kingdom. Further details are set out on
pages 53 to 56 and the Group’s website.
BOARD
The Board currently comprises seven members, two of whom are executive. The Board meets regularly and is responsible for strategy,
performance, approval of major capital projects and the framework of internal controls. To enable the Board to discharge its duties, all
Directors receive appropriate and timely information. Briefing papers are distributed to all Directors in advance of Board meetings, and all
Directors have access to the advice and service of the Company Secretary. The Articles of Association provide that Directors will be subject
to re-election at the first opportunity after their appointment and they will voluntarily submit to re-election at intervals of three years.
SECTION 172 STATEMENT
The Directors continue to act in a way that they consider, in good faith, to be most likely to promote the success of the Company for
the benefits of the members as a whole.
Details of the Board’s decisions in 2019 (and subsequently) to promote long-term success, how it engaged with stakeholders and
considered their interests when making those decisions, can be found throughout the Strategic review, Sustainability, Directors’
and Corporate Governance reports.
70
HUMMINGBIRD RESOURCES directors’ report
AUDIT COMMITTEE
The audit committee comprises David Straker-Smith (Chairman) and Ernie Nutter. The audit committee is responsible for reviewing a wide
range of financial matters including the annual and interim reports, the Company’s internal control and risk management system. The audit
committee’s responsibilities include meeting with the Company’s auditor and agreeing the scope of their audit.
POST REPORTING DATE EVENTS
Events after the reporting date have been disclosed in note 31 to the financial statements.
STRATEGIC REVIEW
The Strategic Review is shown on pages 47 to 52.
RESULTS AND DIVIDENDS
The results of the Group for the year ended 31 December 2020 are set out in the Consolidated Statement of Comprehensive Income.
The Directors do not recommend payment of a dividend for the year (2019: $Nil).
DIRECTORS’ INDEMNITIES
The Company has obtained third party indemnity provisions for the benefit of its Directors and Officers.
SUPPLIER PAYMENT POLICY
It is the Group’s policy to make payments, where possible, to suppliers in accordance with agreed terms provided that the supplier has
performed in accordance with the relevant terms and conditions. Trade payables of the Group at 31 December 2020 were equivalent to
55 (2019: 46) days’ purchases, based on the average daily amount invoiced by suppliers during the year. Trade payables of the Company at
31 December 2020 were equivalent to 70 (2019: 63) days’ purchases, based on the average daily amount invoiced by suppliers during the
year.
CHARITABLE AND POLITICAL DONATIONS
During the year the Company made no charitable donations (2019: $Nil).
The Company did not make any payments to political parties during the year (2019: $Nil).
FINANCIAL RISK MANAGEMENT
The Group is exposed to a variety of financial risks including currency risk, credit risk and liquidity risk. Some of the objectives and policies
applied by management to mitigate these risks are outlined in both the Strategic Review and note 28 to the Consolidated Financial
Statements.
ENERGY CONSUMPTION AND GREENHOUSE GAS EMISSIONS
Details of the Company’s energy efficiency measures are reported in the Operational Review section of this annual report. For the UK, the
Company’s annual energy consumption is less than 40,000 kWh and is therefore exempt from reporting its UK greenhouse gas emission
under the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.
FUTURE DEVELOPMENTS
Details of future developments are set out in the CEO’s Statement and Chairman’s Statement.
71
ANNUAL REPORT + ACCOUNTS 2020
GOVERNANCE
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
Each of the persons who is a Director at the date of approval of this Annual Report confirms that:
■
■
so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and
the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit
information and to establish that the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of sections 418 of the Companies Act 2006.
AUDITOR
RSM UK Audit LLP have expressed their willingness to continue in office as auditor and a resolution to re-appoint them will be proposed
at the forthcoming Annual General Meeting.
The Strategic Review and Directors’ Report have been approved by the Board and signed on its behalf by:
DE Betts
Director
26 May 2021
Registered Office:
49-63 Spencer Street, Hockley, Birmingham, B18 6DE
Company registered in England and Wales 05467327
72
HUMMINGBIRD RESOURCES directors’ responsibility statement
The Directors are responsible for preparing the Strategic Review, the Directors’ Report, and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors are required
by the AIM Rules of the London Stock Exchange to prepare Group financial statements in accordance with International Financial Reporting
Standards (“IFRS”) and the Companies Act 2006) and have elected under company law to prepare the company financial statements in
accordance with IFRS.
The financial statements are required by law and IFRS to present fairly the financial position of the Group and the Company and the financial
performance of the Group. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of
that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.
In preparing the Group and Company financial statements, the Directors are required to:
■
■
■
■
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether they have been prepared in accordance with IFRSs;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable
them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets
of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Hummingbird
Resources PLC website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.
73
ANNUAL REPORT + ACCOUNTS 2020
FINANCIAL STATEMENTS
independent auditor’s report
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HUMMINGBIRD RESOURCES PLC
OPINION
We have audited the financial statements of Hummingbird Resources Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 31 December 2020 which comprise the consolidated statement of comprehensive income, consolidated statement of financial
position, consolidated statement of cashflows, consolidated statement of changes in equity, company statement of financial position,
company statement of cashflows, company statement of changes in equity and notes to the financial statements, including significant
accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International
Accounting Standards in conformity with the requirements of the Companies Act 2006 and, as regards the parent company financial
statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
■
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December
2020 and of the group’s profit for the year then ended;
■
the group financial statements have been properly prepared in accordance with International Accounting Standards in conformity with
the requirements of the Companies Act 2006;
■
the parent company financial statements have been properly prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and as applied in accordance with the Companies Act 2006; and
■
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to SME listed entities and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue
to adopt the going concern basis of accounting included obtaining cash flow forecasts covering a period of more than 12 months from
the date of sign off and reviewing these for reasonableness, including the associated assumptions and sensitivities. The gold price is a key
assumption in the forecasts. Prices around the current level are expected to remain at least for the remainder of 2021 and, therefore, is
considered extremely unlikely to fall below the sensitised value as an average over the forecast period. In the event that the price fell to the
sensitised value, there are a number of options available to management to address the resulting cash shortfall, including an overdraft facility,
sale of liquid assets and the removal of some planned, but discretionary, project costs.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group’s or the parent company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
74
HUMMINGBIRD RESOURCES
SUMMARY OF OUR AUDIT APPROACH
Key audit matters
Materiality
Group
■
Acquisition of Kouroussa Gold Project
■
Liberia earn-in agreement
Parent Company
None
■
Group
■
Overall materiality: $1,200,000 (2019: $829,000)
■
Performance materiality: $903,000 (2019: $622,000)
Parent Company
■
Overall materiality: $853,000 (2019: $298,000)
Scope
■
■
Performance materiality: $639,000 (2019: $223,000)
Our audit procedures covered 100% of revenue, total assets and profit before tax.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we
identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the group financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Acquisition of Kouroussa Gold Project
Key audit matter
description
As detailed in note 23, on 1 September 2020, the group acquired 100% of the shares in Cassidy
Gold Guinea SA, the Kouroussa Gold Project, located in Guinea from Cassidy Gold Corp, a company
incorporated in British Columbia, Canada. The Directors have treated this as an asset purchase as
opposed to a business combination on the basis that, in their view, on the date of acquisition, Cassidy
Gold Guinea SA did not constitute a business.
Consideration was comprised of shares in Hummingbird Resources Plc and deferred consideration,
as detailed in note 23.
In accordance with the treatment for the acquisition of a group of assets that does not constitute a
business, the cost (fair value of consideration paid) has been allocated to the individual identifiable assets
and liabilities on the basis of their relative fair values at the date of purchase. The majority of the cost was
allocated to the mine development asset.
We considered this to be a Key Audit Matter due to the significant judgement and estimation required for
both deciding on the appropriate treatment, the subsequent fair values at which to recognise the assets
and liabilities and their classification in the financial statements.
How the matter was
addressed in the audit
We have obtained and reviewed the documentation surrounding the acquisition and considered the nature
of the transaction against the requirements of IFRS 3. In our assessment, we concluded that the fair value
of the gross assets acquired is concentrated in one identifiable asset and consequently the concentration
test is satisfied. It is therefore appropriate to recognise this purchase as an asset acquisition.
We have audited the fair value of consideration, which totals $22.861m, through consideration of the
inputs used and recalculation, considering each of the components of the consideration.
We have corroborated the shares issued and held in treasury at the year end, recalculating the fair value
with reference to the applicable price and exchange rates on the day of the purchase.
We have obtained and audited management’s calculations for the fair values of the deferred consideration,
agreeing the terms to supporting documentation, considered the assumptions made for reasonableness
and confirmed the mechanical integrity of the models including consultation with a valuation specialist.
We have considered the allocation of the cost to the assets and liabilities acquired for reasonableness,
with the majority of assets recorded as mine development assets and the most significant liability being the
smelter royalty. We have audited the smelter royalty by developing our own point estimate and by agreeing
the terms to supporting documentation, considering the assumptions made for reasonableness and
confirmed the mechanical integrity of the models, again including consultation with a valuation specialist.
75
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
Liberia earn-in agreement
Key audit matter
description
As described in note 24, on 4 June 2020 the group signed an earn-in agreement with ARX Resources
Limited in respect of the Dugbe Gold Project in Liberia (“Dugbe”). The earn in agreement requires ARX to
complete a Definitive Feasibility Study (“DFS”), carry out a significant exploration programme and cover all
project costs over the 2 year earn-in period. Should the requirements be satisfied, ARX will earn up to a
49% interest in Dugbe.
Management have developed an accounting policy (see page 91) to credit the funding received from ARX
to the Liberia E&E assets, with subsequent expenditure being capitalised. The ARX funding therefore does
not impact on the E&E carrying value. Management consider that this policy reflects the substance of the
transaction. Given the judgement involved in developing an appropriate accounting policy, this has been
identified as a key audit matter.
How the matter was
addressed in the audit
We have obtained and reviewed the documentation of the earn-in agreement with ARX Resources Limited
and have confirmed the key terms, as well as discussing with management to understand the commercial
rationale.
We have considered whether the accounting policy adopted by management is appropriate given the
nature of the transaction and sufficiently disclosed.
OUR APPLICATION OF MATERIALITY
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit
procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as a whole, could
reasonably influence the economic decisions of the users we take into account the qualitative nature and the size of the misstatements.
Based on our professional judgement, we determined materiality as follows:
Overall materiality
$1,200,000 (2019: $829,000)
GROUP
PARENT COMPANY
$853,000 (2019: $298,000)
Basis for determining
overall materiality
Rationale for benchmark
applied
5% of result before tax
0.6% of net assets
Investors are interested in the return on their investment,
especially in relation to potential future dividends and
therefore results of the year drive share price and the
Group’s ability to pay dividends.
The parent is a holding company for the group
with the key balances being the investment
in group companies and the intercompany
receivables.
Performance materiality
$903,000 (2019: $622,000)
$639,000 (2019: $223,000)
Basis for determining
performance materiality
75% of overall materiality
75% of overall materiality
Reporting of
misstatements to the Audit
Committee
Misstatements in excess of $60,200 and
misstatements below that threshold that, in our view,
warranted reporting on qualitative grounds.
Misstatements in excess of $42,600 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The group consists of four components, being Mali, Liberia, Guinea and Corporate. Their locations and operations are set our below:
■
■
■
■
Mali – Located in Mali and contains the Group’s mining operations and some Exploration and Evaluation assets.
Liberia – Located in Liberia and contains the majority of the Group’s Exploration and Evaluation assets.
Guinea – Located in Guinea and contains the assets and liabilities of the newly acquired Kouroussa Gold Project
Corporate – Located in the United Kingdom and contains the head office operations.
The coverage achieved by our audit procedures was:
Full scope audit
Specific audit procedures
Total
NUMBER OF
COMPONENTS
3
1
4
REVENUE
TOTAL ASSETS
PROFIT BEFORE TAX
100%
0%
100%
89%
11%
100%
100%
0%
100%
The Guinea component was subject to specific audit procedures as it contains the assets and liabilities acquired in respect of the Kouroussa
Gold Project, which is a Key audit matter.
76
HUMMINGBIRD RESOURCES OTHER INFORMATION
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report
thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement
in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact.
We have nothing to report in this regard.
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course of the audit:
■
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
■
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if,
in our opinion:
■
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
■
■
■
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement set out on page 73, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
THE EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD
Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient appropriate audit
evidence regarding compliance with laws and regulations that have a direct effect on the determination of material amounts and disclosures
in the financial statements, to perform audit procedures to help identify instances of non-compliance with other laws and regulations that
may have a material effect on the financial statements, and to respond appropriately to identified or suspected non-compliance with laws
and regulations identified during the audit.
77
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the financial statements due to
fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing
and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified during the audit.
However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity’s
operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit engagement team:
■
obtained an understanding of the nature of the industry and sector, including the legal and regulatory frameworks that the group and
parent company operates in and how the group and parent company are complying with the legal and regulatory frameworks;
■
inquired of management, and those charged with governance including the Audit Committee, about their own identification and
assessment of the risks of irregularities, including any known actual, suspected or alleged instances of fraud;
■
discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how and
where the financial statements may be susceptible to fraud.
The most significant laws and regulations were determined as follows:
Legislation / Regulation
Additional audit procedures performed by the audit engagement team included:
Mining laws
Obtaining an understanding of the control environment in monitoring compliance with laws and regulations
in the countries in which the group operates, primarily Mali;
Reviewing minutes from board meetings of those charged with governance to identify any instances of
non-compliance with laws and regulations.
IFRS and Companies Act
2006
Review of the financial statement disclosures and testing to supporting documentation;
Completion of disclosure checklists to identify areas of non-compliance.
Tax compliance regulations
Inspection of advice received from internal tax advisors.
The areas that we identified as being susceptible to material misstatement due to fraud were:
Risk
Audit procedures performed by the audit engagement team:
Management override of
controls
Testing the appropriateness of journal entries and other adjustments;
Assessing whether the judgements made in making accounting estimates are indicative of a potential bias;
and
Evaluating the business rationale of any significant transactions that are unusual or outside the normal
course of business.
Liberia earn-in agreement
See Key audit matters section above.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
PAUL WATTS (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
Date: 26 May 2021
78
HUMMINGBIRD RESOURCES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2020
Notes
2020
$’000
2019
$’000
Continuing operations
Revenue
Production costs
Amortisation and depreciation
Royalties and taxes
Cost of sales
Gross profit
Share based payments
Other administrative expenses
Operating profit
Finance income
Finance expense
Share of associate loss
Share of joint venture loss
Reversals in impairment of financial assets
Gains on financial assets measured at fair value
Profit before tax
Tax
Profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Profit for the year
26
6
9
9
12
12
16
12
10
185,072
(93,975)
(41,367)
(6,747)
(142,089)
42,983
(2,081)
(8,928)
31,974
2,014
(9,288)
–
(17)
397
1,203
26,283
(1,135)
25,148
19,022
6,126
25,148
Earnings per share (attributable to equity holders of the parent)
Basic ($ cents)
Diluted ($ cents)
11
11
5.35
5.02
156,874
(86,298)
(38,783)
(5,726)
(130,807)
26,067
(753)
(12,056)
13,258
2,241
(8,278)
(62)
(4)
23
2,218
9,396
(1,551)
7,845
5,422
2,423
7,845
1.53
1.50
79
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2020
Assets
Non-current assets
Intangible exploration and evaluation assets
Intangible assets software
Property, plant and equipment
Right of use assets
Investments in associates and joint ventures
Financial assets at fair value through profit or loss
Deferred tax assets
Current assets
Inventory
Trade and other receivables
Unrestricted cash and cash equivalents
Restricted cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred consideration
Other financial liabilities
Provisions
Current liabilities
Trade and other payables
Lease liabilities
Other financial liabilities
Borrowings
Total liabilities
Net assets
Equity
Share capital
Share premium
Shares to be issued
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interest
Total equity
Notes
2020
$’000
2019
$’000
13
13
14
19
12
12
20
16
16
16
16
17
19
23
22
18
21
19
22
17
25
25
25
75,574
204
150,247
13,797
175
7,721
684
248,402
20,352
12,724
6,552
4,516
44,144
73,859
284
129,732
12,940
99
6,103
–
223,017
18,082
11,557
4,398
4,131
38,168
292,546
261,185
–
2,380
5,402
6,836
16,125
30,743
39,440
10,894
15,000
13,208
78,542
109,285
183,261
5,344
488
17,407
150,246
173,485
9,776
183,261
10,148
3,661
–
14,879
28,688
39,809
8,933
15,000
29,852
93,594
122,282
138,903
5,301
–
–
129,952
135,253
3,650
138,903
The financial statements of Hummingbird Resources PLC were approved by the Board of Directors and authorised for issue on 26 May 2021.
They were signed on its behalf by:
DE Betts
Director
Company number 05467327
The notes to the consolidated financial statements form part of these financial statements.
80
HUMMINGBIRD RESOURCES CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2020
Net cash inflow from operating activities
Investing activities
Asset purchase, net of cash acquired
Purchases of intangible exploration and evaluation assets
Purchases of property, plant and equipment
Pasofino funding
Pasofino funding utilisation
Purchase by non-controlling interest
Purchase of shares in other companies
Interest received
Net cash used in investing activities
Financing activities
Exercise of share options
Lease principal payments
Lease interest payments
Loan interest paid
Loans repaid
Commissions and other fees paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
27
23
24
24
16
2020
$’000
66,256
(35)
(2,601)
(18,136)
5,559
(4,673)
1,883
(393)
11
(18,385)
532
(12,663)
(1,201)
(2,547)
(29,252)
(571)
(45,702)
2,169
370
8,529
11,068
2019
$’000
44,724
–
(3,836)
(15,471)
–
–
–
(402)
65
(19,644)
30
(11,346)
(525)
(4,280)
(20,809)
(844)
(37,774)
(12,694)
(307)
21,530
8,529
81
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020
SHARE
CAPITAL
$’000
SHARES TO BE
ISSUED
$’000
SHARE
PREMIUM
$’000
RETAINED
EARNINGS
$’000
TOTAL EQUITY
ATTRIBUTABLE
TO THE PARENT
$’000
NON–
CONTROLLING
INTEREST
$’000
TOTAL
$’000
Balance at 1 January 2019
Comprehensive income for the year:
Profit for the year
Total comprehensive income for the year
Share based payments
Other
As at 31 December 2019
Comprehensive income for the year:
Profit for the year
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Shares to be issued as consideration in asset
purchase (note 23)
Total transactions with owners in their
capacity as owners
Share based payments
As at 31 December 2020
5,271
–
–
30
–
5,301
–
–
–
–
43
5,344
–
–
–
–
–
–
–
–
17,407
17,407
–
17,407
–
124,117
129,388
1,227
130,615
–
–
–
–
–
–
–
–
–
488
488
5,422
5,422
422
(9)
5,422
5,422
452
(9)
2,423
2,423
–
–
7,845
7,845
452
(9)
129,952
135,253
3,650
138,903
19,022
19,022
19,022
19,022
6,126
6,126
25,148
25,148
–
17,407
–
1,272
17,407
1,803
–
–
–
17,407
17,407
1,803
150,246
173,485
9,776
183,261
Share capital
The share capital comprises the issued ordinary shares of the Company at par value.
Share premium
The share premium comprises the excess value recognised from the issue of ordinary shares for consideration above par value.
Retained earnings
Retained earnings comprise distributable reserves.
Non–controlling interest
The non–controlling interest relates to the 20% stake the Government of Mali has in Société Des Mines De Komana SA (“SMK”) which owns
and operates the Yanfolila Mine.
Shares to be issued
Relates to the shares to be issued in settling the initial purchase consideration on the Kouroussa Gold Project.
82
HUMMINGBIRD RESOURCES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2020
1
GENERAL INFORMATION
Hummingbird Resources PLC is a public limited company with securities traded on the AIM market of the London Stock Exchange.
It is incorporated and domiciled in the United Kingdom and has a registered office at 49-63 Spencer Street, Hockley, Birmingham,
West Midlands, B18 6DE.
The nature of the Group’s operations and its principal activities are the exploration, evaluation, development, and operating of mineral
projects, principally gold, focused currently in West Africa.
2
ADOPTION OF NEW AND REVISED STANDARDS
The financial statements have been drawn up on the basis of accounting policies consistent with those applied in the financial
statements for the year ended 31 December 2019. The following standards have been adopted in the year with no material impact
on the financial statements of the Company or the Group.
Amendment to Conceptual Framework
IFRS 3 (Amendment)
IFRS 9, IAS 39, IFRS 7 (Amendments)
IFRS 16 (Amendments)
Definition of Materiality (amendments to IAS 1 and IAS 8)
(effective 1 January 2020)
(effective 1 January 2020)
(effective 1 January 2020)
(effective 1 June 2020)
(effective 1 January 2020)
Definition of a Business
Interest Rate Benchmark Reform
COVID-19 Rent Concessions
The following Standards and Interpretations which have not been applied in the financial statements were in issue but not yet effective.
IFRS 17
(effective 1 January 2023)
Insurance contracts
3
SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The financial statements have been properly prepared in accordance with International Accounting Standards in conformity with the
requirements of the Companies Act 2006.
The principal accounting policies adopted are set out below.
The functional currency of all companies in the Group is United States Dollar (“$”). The financial statements are presented in thousands
of United States dollars (“$’000”). For reference the year-end exchange rate from Sterling to $ was $1.3650 (2019: $1.3185).
Going concern
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are set out in the Financial Review
on pages 40 to 46. At 31 December 2020, the Group had cash and cash equivalents of $11.1 million and total borrowings of
$13.2 million. As at December 31, 2020, the Company had a working capital deficiency (current assets less current liabilities) of
$34.3 million. The current liabilities include Anglo Pacific royalty liability of $15 million which, although current due to the nature of the
agreement, is not expected to be paid soon. Details on the Group’s borrowings are set out in note 17 to the financial statements.
The Group has prepared cash flow forecasts based on estimates of key variables including production, gold price, operating costs,
capital expenditure through to December 2022 that supports the conclusion of the Directors that they expect funding arrangements
currently in place to be sufficient to meet the Group’s anticipated cash flow requirements to this date.
These cashflow forecasts are subject to a number of risks and uncertainties, in particular the ability of the Group to achieve the planned
levels of production and gold prices. The Board reviewed and challenged the key assumptions used by management in its going
concern assessment, as well as the scenarios applied and risks considered, including the risks associated with COVID-19. To date,
although there have not been any significant operational disruptions due to COVID-19, cost and logistical pressures were felt by the
Group throughout 2020. The Board has considered the operational disruption that could be caused by factors such as illness amongst
our workforce and potential disruptions to supply chain, factoring in these potential impacts and reasonable mitigating actions to
forecasts and sensitivity scenarios.
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ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
The Board also considered sensitivities to those cash flow scenarios (including where production is lower than forecast) which in some
cases showed tight cash flow months. Should this situation arise, the Directors believe that they have a number of options available to
them, such as deferring certain expenditures and/or obtaining additional funding, which would allow the Group to meet its cash flow
requirements through this period.
Based on its review, the Board has a reasonable expectation that the Group has adequate resources to continue operating for the
foreseeable future and hence the Board considers that the application of the going concern basis for the preparation of the Financial
Statements was appropriate.
Should the Group be unable to achieve the required levels of production and associated cashflows, defer expenditures or obtain
additional funding such that the going concern basis of preparation was no longer appropriate, adjustment would be required including
the reduction of balance sheet asset values to their recoverable amounts and to provide for future liabilities should they arise.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December 2020. Control is achieved where the Company has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed during the period are included in the consolidated statement of comprehensive income
from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made
to the financial statements of subsidiaries to bring accounting policies used into line with those used by the Group. All intra-group
transactions, balances, income and expenses are eliminated on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein.
Non-controlling interests consist of the amount of those interests at the date of the original business combination and the relevant
non-controlling interest’s share of changes in equity since the date of the combination. Losses applicable to the non-controlling interest
in excess of the non-controlling parties’ interests in the subsidiary’s equity are allocated against the interest of the Group except to the
extent that the non-controlling interest has a binding obligation and is able to make an additional investment to cover the losses.
Joint ventures
Joint ventures are entities or arrangements where the Group has joint control. Investments in joint ventures are accounted for using
the equity method of accounting, after initially being recognised at cost.
Associates
Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case where
the Group holds between 20% and 50% of the voting rights, or where the Group can exercise other forms of influence. Investments in
associates are accounted for using the equity method of accounting, after initially being recognised at cost.
Equity method
When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other
unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments
on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s
interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the
policies adopted by the Group.
The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in note 12.
Changes in ownership interests
When the Group ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant
influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or
loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an
associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect
of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts
previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only
a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss
where appropriate.
84
84
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES Leasing
The Group as a lessee
For any new contracts entered into on or after 1 January 2019, the Group considers whether a contract is, or contains a lease. A lease
is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period in exchange for
consideration’.
To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:
–
the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified
at the time the asset is made available to the Group;
–
the Group has the right to obtain substantially all the economic benefits from use of the identified asset throughout the period of
use, considering its rights within the defined scope of the contract; and
–
the Group has the right to direct the use of the identified asset throughout the period of use. The Group assesses whether it has
the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use
asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the
Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance
of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end
of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment
when such indicators exist.
The lease liability is initially measured at the present value of the unpaid lease payments at the commencement date, discounted using
the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate. Generally, the Group uses
its incremental borrowing rates as the discount rate. Lease payments included in the measurement of the lease liability are made up of
fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a
residual value guarantee and payments arising from options reasonably certain to be exercised.
The lease liability is measured at amortised cost using the effective interest method. Subsequent to initial measurement, the liability will
be reduced for payments made and increased for interest. It is subsequently remeasured to reflect any reassessment or modification,
or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected
in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.
Short-term leases and low-value assets
The Group has elected to account for short-term leases of 12 months or less and leases of low-value assets using the practical
expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an
expense in profit or loss on a straight-line basis over the lease term.
Lease under IAS 17
Prior to 1 January 2019, the Group classified rentals payable as operating leases and these were not recognised in the Group’s financial
position. Payments made under operating leases were charged to income on a straight-line basis over the term of the relevant lease.
Right of use assets are depreciated at the lower of lease term and useful life.
Foreign currencies
For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in
US Dollars (“$”), which is the functional currency of all of the entities in the Group, and the presentation currency for the consolidated
financial statements.
Exchange differences are recognised in profit or loss in the period in which they arise.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of
comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the reporting date.
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ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using
the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition
of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects
neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
Revenue
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in
exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the
contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into
account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance
obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue
when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services
promised.
Sale of gold
Revenue from gold sales is recognised when the customer has accepted delivery of the goods. Amounts disclosed as revenue are
net of sales returns and trade discounts. Consideration is paid by the customer once the customer has accepted delivery.
The Company remains committed to operating as an unhedged gold producer. However, as a single asset producer a significant fall
in the gold price could materially impact the Group’s ability to service debt and meet operating costs. Accordingly, where considered
appropriate the Group invests in low cost put options to insure against the risk of falling gold prices without capping the exposure to
the upside. On 31 December 2020, the Group carried no put options. The cost of options throughout 2020 was $479,000.
Intangible exploration and evaluation assets
The Group applies the full cost method of accounting for exploration and evaluation (“E&E”) costs, having regard to the requirements
of IFRS 6 Exploration for and Evaluation of Mineral Resources. Under the full cost method of accounting, costs of exploring for and
evaluating mineral resources are accumulated by reference to appropriate cost centres being the appropriate licence area but are
tested for impairment on a cost pool basis as described below.
E&E assets comprise costs of (i) E&E activities that are ongoing at the reporting date, pending determination of whether or not
commercial reserves exist and (ii) costs of E&E that, whilst representing part of the E&E activities associated with adding to the
commercial reserves of an established cost pool, did not result in the discovery of commercial reserves.
Costs incurred prior to having obtained the legal rights to explore an area are expensed directly to the statement of comprehensive
income as they are incurred.
Once the legal rights are obtained to explore all costs of E&E are initially capitalised as E&E assets. Payments to acquire the legal right
to explore, costs of technical services and studies, seismic acquisition, exploratory drilling and testing are capitalised as intangible
E&E assets.
Such costs include directly attributable overheads, including the depreciation of property plant and equipment utilised in E&E activities,
together with the cost of other materials consumed during the E&E phases.
86
86
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES Treatment of E&E assets at conclusion of appraisal activities
Intangible E&E assets related to each exploration licence/prospect are carried forward, until the existence (or otherwise) of commercial
reserves has been determined. If commercial reserves have been discovered, the related E&E assets are assessed for impairment on a
cost pool basis as set out below and any impairment loss is recognised in the statement of comprehensive income. The carrying value,
after any impairment loss, of the relevant E&E assets is then reclassified as mine development assets.
Impairment of E&E assets
E&E assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable
amount. Such indicators include, but are not limited to, those situations outlined in paragraph 20 of IFRS 6 Exploration for and
Evaluation of Mineral Resources and include the point at which a determination is made as to whether or not commercial reserves exist.
Where there are indications of impairment, the E&E assets concerned are tested for impairment. Where the E&E assets concerned
fall within the scope of an established full cost pool, the E&E assets are tested for impairment together with all development and
production assets associated with that cost pool, as a single cash-generating unit.
The aggregate carrying value is compared against the expected recoverable amount of the pool, generally by reference to the present
value of the future net cash flows expected to be derived from production of commercial reserves.
Any impairment loss is recognised in the statement of comprehensive income as additional depreciation and amortisation,
and separately disclosed.
The Group considers there to be two cost pools, being the whole of Liberia and whole of Mali, and therefore aggregates assets in
respect of each for the purposes of determining whether impairment of E&E assets has occurred.
Intangible assets software
Intangible software assets are carried at cost less accumulated amortisation. Amortisation of the software to the statement of
comprehensive income will be completed in line with the useful life of the software. However, where the software assets relate to mine
development assets, amortisation to mine development assets will occur and follow the amortisation of mine development as shown
below.
Property, plant and equipment
Property, plant and equipment (“PP&E”) are carried at cost less accumulated depreciation and any recognised impairment loss.
Property, plant and equipment are depreciated using the units of production method based on ounces produced, or the straight-line
method over the estimated useful lives of the related assets using the following rates:
Mine development assets
Mine closure assets
Plant & equipment
Infrastructure
Mobile & other equipment
Other
units of production method
units of production method
units of production method
10% - 33.3% per annum
10% - 33.3% per annum
10% - 33.3% per annum
Under the units of production (“UOP”) method, estimated economically recoverable reserves are used in determining the depreciation
and/or amortisation of mine development assets. This results in a depreciation/amortisation charge proportional to the depletion of the
anticipated remaining life of mine production. Each item’s life, which is assessed annually, has regard to both its physical life limitations
and present assessments of economically recoverable reserves of the mining interest at which the asset is located. The Group has
adopted the total output method (i.e., ounces produced) as a basis for determining the UOP. Changes are accounted for prospectively.
Upon disposal or abandonment, the carrying amounts of property, plant and equipment and accumulated depreciation and depletion
are removed from the accounts and any associated gains or losses are recorded in the statement of comprehensive income.
Amounts incurred on assets under construction are capitalised until the asset becomes available for its intended use, at which time
depreciation commences on the assets over its useful life. Repairs and maintenance of plant and equipment are expensed as incurred.
Costs incurred to enhance the service potential of plant and equipment are capitalised and depreciated over the remaining useful life
of the improved asset.
Impairment of property, plant and equipment
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
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ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of
the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an
impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation increase.
Borrowing costs
Borrowing costs are capitalised when they are directly attributable to the acquisition, construction or production of qualifying assets,
which are assets that take a substantial period of time to get ready for their intended use or sale. Borrowing costs are added to the
cost of those assets, until such time as the assets are substantially ready for their intended use or sale, or if construction is interrupted
for an extended period. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Inventory
Inventory consists of finished goods, work-in-process, stockpiled ore and consumables. Finished goods, work-in-process, and
stockpiled ore are valued at the lower of average production costs and net realisable value. Production costs include the cost of raw
materials, direct labour, mine-site overhead expenses, depreciation and depletion of mining interests. Consumables are valued at the
lower of average cost and net realisable value. Cost includes acquisition, freight and other directly attributable costs.
Net realisable value is calculated as the estimated sale price (based on prevailing market rates) less estimated future production costs
to convert the inventories into saleable form. When inventories have been written down to net realisable value, a new assessment of net
realisable value is made in each subsequent period. When the circumstances that caused the write down no longer exist, the amount
of the write down is reversed.
Financial instruments
Recognition of financial assets and financial liabilities
Financial assets and financial liabilities are recognised on the Group’s statement of financial position when the Group becomes a party
to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction
costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Fair value measurement hierarchy
The classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance
of the input used in making the fair value measurement.
The fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: input other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable input).
The level in the fair value hierarchy within which the financial asset or financial liability is categorised is determined on the basis of the
lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety
into only one of the three levels.
88
88
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES (a) Financial assets
Classification of financial assets
All recognised financial assets are measured subsequently at either amortised cost or fair value, depending on the classification of the
financial assets.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
■
the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash
flows; and
■
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
The Group does not hold any financial assets that meet conditions for subsequent recognition at fair value through other
comprehensive income (“FVTOCI”). All other financial assets are measured subsequently at fair value through profit or loss (“FVTPL”).
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to cash flows from the asset expire; or it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor
retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its
retained interest in the asset and an associated liability for the amount it may have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost
through other profit or loss. The measurement of the loss allowance depends upon the consolidated entity’s assessment at the end of
each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition, based on
reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss
allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event that
is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk
has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit
loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the
instrument discounted at the original effective interest rate.
(b) Financial liabilities
Classification of financial liabilities
The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its
characteristics. The Group’s financial liabilities consist of financial liabilities measured at amortised cost and financial liabilities at fair
value through profit or loss.
The Group’s financial liabilities measured at amortised cost comprise loans and other borrowings, lease obligations and other payables
and accruals.
Derecognition of financial liabilities
The Group derecognises financial liabilities when the Group’s obligations are discharged, cancelled, expired or transferred.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost less any
provision for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash with three months or less remaining to maturity and are subject to an insignificant risk
of changes in value.
Trade and other payables
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective
interest rate method.
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ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that
an outflow of economic resource will result and that outflow can be reliably measured.
Rehabilitation
The Group records the present value of estimated costs of legal and constructive obligations required to restore mining and other
operations in the period in which the obligation is incurred. The nature of these restoration activities includes dismantling and removing
structures, rehabilitating mines and tailings dams, dismantling operating facilities, closure of plant and waste sites, and restoration,
reclamation and revegetation of affected areas.
The obligation generally arises when the asset is installed, or the ground/environment is disturbed at the mining production location.
When the liability is initially recognised, the present value of the estimated costs is capitalised by increasing the carrying amount of the
related mining assets to the extent that it was incurred by the development/construction of the mine. Over time, the discounted liability
is increased for the change in present value based on the discount rates that reflect current market assessments and the risks specific
to the liability.
The periodic unwinding of the discount is recognised in profit or loss as a finance cost. Additional disturbances or changes in
rehabilitation costs are recognised as additions or charges to the corresponding assets and rehabilitation liability when they occur.
Changes to estimated future costs are recognised in the statement of financial position by either increasing or decreasing the
rehabilitation liability and asset to which it relates if the initial estimate was originally recognised as part of an asset measured in
accordance with IAS 16 Property, Plant and Equipment.
Any reduction in the rehabilitation liability and, therefore, any deduction from the asset to which it relates, may not exceed the carrying
amount of that asset. If it does, any excess over the carrying value is taken immediately to profit or loss.
Contingent liabilities
Contingent liabilities are possible obligations whose existence will be confirmed by uncertain future events that are not wholly within
the control of the Group. An example is litigation against the Group when it is uncertain whether the Group has committed an act of
wrongdoing and when it is not probable that settlement will be needed.
Contingent liabilities also include obligations that are not recognised because their amount cannot be measured reliably or because
settlement is not probable. Contingent liabilities do not include provisions for which it is certain that the Group has a present obligation
that is more likely than not to lead to an outflow of cash or other economic resources, even though the amount or timing is uncertain.
Unless the possibility of an outflow of economic resources is remote, a contingent liability is disclosed in the notes to the financial
statements.
Other financial liabilities (accounting for royalty financing)
In order to determine the appropriate accounting treatment for the royalty financing which is described in note 22. assessment is
required of whether the substance of the arrangements constituted a financial liability, prior to commercial production. The Group can
be required to deliver cash to the provider in certain circumstances which are not all within the Group’s control, then this is considered
by the Group to represent a financial liability. The Group has chosen not to designate this as “a fair value through profit or loss” financial
liability and therefore it is recognised at amortised cost. Following commencement of commercial production, the Group is obliged
to pay a percentage of its revenue, then this is considered to have extinguished the financial liability, and this is recognised as a part
disposal of the relevant asset.
Borrowings
The Group records and measures borrowings at amortised cost, using the effective interest rate method.
Equity
Ordinary shares are classed as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a
deduction from the proceeds.
Share-based payments
The Group has applied IFRS 2 Share based Payment for all share-based payments.
The Group has used shares, share options and other share-based payments as consideration for goods and services received from
suppliers and employees.
Share based payments to employees and others providing similar services are measured at fair value at the date of grant. The fair value
determined at the grant date of an equity-settled share-based instrument is expensed on a straight-line basis over the vesting period,
based on the Group’s estimate of the shares (or other instruments) that will eventually vest. For equity settled share-based payments
the corresponding amount is credited to retained earnings. For cash settled share-based payments the corresponding amount is
recognised as a liability and remeasured at each reporting date with any changes in fair value being recognised in the statement of
comprehensive income.
90
90
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES Equity-settled share based payment transactions with other parties are measured at the fair value of the goods or services received,
except where the fair value cannot be estimated reliably or excess fair value of the identifiable goods or services received, in which
case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the
counterparty renders the service. The fair value determined at the grant date of such an equity-settled share-based instrument is
expensed since the shares vest immediately. Where the services are related to the issue of shares, the fair values of these services
are offset against share premium in equity.
Fair value of share options and similar instruments are measured using the Black-Scholes model. The expected life used in the model
has been adjusted based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural
considerations.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments
and making strategic decision, has been identified as the Board of Directors.
The Board of Directors considers there to be four operating segments with only one operating to a significant degree during the year,
the exploration, development and exploitation of mineral resources, and four geographical segments, being Liberia, Mali, Guinea and
United Kingdom.
Business combinations
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated
statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair
values at the acquisition date, which is the date when control passes to the Company. The results of the acquired operations are
included in the consolidated statement of comprehensive income from the date on which control was obtained. Any difference arising
between the fair value and tax base of the acquiree’s assets and liabilities that give rise to a taxable deductible difference results in
recognition of deferred tax liability. No deferred tax liability is recognised on goodwill.
Liberia earn-in earn agreement
Amounts advanced as part of earn-in agreements are initially netted off against the related asset, and then added back when spent,
until the conclusion of the earn-in agreement. This is because despite the spend, these amounts would not have been spent by the
Company and therefore no recognition of these expenditure in the Company’s financial position.
4
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of the Group’s accounting policies, which are described in note 3, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of the assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the
revision affects both the current and future periods.
The following are the critical judgements and estimations that the Directors have made in the process of applying the Group’s
accounting policies and that have the most significant effect on the amounts recognised in the financial statements:
Recoverability of exploration and evaluation assets
Determination as to whether an exploration and evaluation (“E&E”) asset is impaired requires an assessment of whether there are any
indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6 Exploration for and Evaluation
of Mineral Resources. As E&E assets are assessed for impairment on a cost pool basis, the existence and quantum of any impairment
is dependent on the choice of basis of cost pools. If there is any indication of potential impairment, an impairment test is required
based on value in use of the asset. This assessment involves judgement as to: (i) the likely future commerciality of each cost pool of
assets; (ii) when such commerciality should be determined; and (iii) the potential future revenues and the value in use. The value in use
calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit (“CGU”) and a suitable
discount rate in order to calculate present value.
The Group considers there to be three cost pools, being the whole of Liberia, the whole of Guinea and whole of Mali, and therefore
aggregates assets in respect of each for the purposes of determining whether impairment of E&E assets has occurred.
At 31 December 2020, the share price of the Group was 33.25 pence per share which valued the Group at approximately $178 million.
The net assets of the Group were $183 million. Based on above the net assets of the Group are less than the market capitalisation and
hence there were indicators of impairment at that date. Since the Group’s net assets exceeded the Group’s market capitalisation,
a review for impairment indicators was required.
9191
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
Liberia
Following the signing of the earn-in agreement with ARX/Pasofino who continue to progress the project, the recoverability of the
Liberian cash generating unit was assessed using a combination of two methods. The first was through the valuation of Pasofino as
management believes most of the value of this company is driven from the earn-in agreement on the Dugbe Project, and therefore
believe the value of Pasofino provides an indication of the potential value of Dugbe. The second method continued to consider the
recoverable amount of the Liberian cash generating unit (“CGU”), with reference to the 2013 Preliminary Economic Assessment (‘PEA’).
Both these methods proved that no impairment loss was to be recognised for the year ended 31 December 2020.
Guinea
Assessment was done in respect of the newly acquired Kouroussa Gold Project in Guinea, with reference to the most recently available
economic information and its current life of mine estimates. There are currently no separately identified E&E assets in Guinea, and
therefore, no impairment loss was recognised for the year ended 31 December 2020.
Mali
Having considered the recoverable amount of the Malian CGU, with reference to the Group’s latest budget and life of mine plan for the
Group’s Yanfolila Gold Mine in Mali (noted below), no impairment loss was recognised for the year ended 31 December 2020.
There is a possibility that changes in circumstances will alter these projections, which may impact on the recoverable amount of the
assets.
Recoverability of mine property, plant and equipment
Determination as to whether, and by how much, an asset or cash generating unit (“CGU”) is impaired involves management estimates
on highly uncertain matters such as; gold price, discount rates used in determining the estimated discounted cash flows of CGU,
foreign exchange rates, the level of proved and probable reserves and measured, indicated and inferred mineral resources that may be
included in the determination of fair value less cost to dispose (“fair value”), future technological changes which could impact the cost
of mining, and future legal changes (including changes to environmental restoration obligations). The costs to dispose are estimated by
management based on prevailing market conditions.
When applicable, fair value is estimated based on discounted cash flows using latest budgets, based on CGU life of mine (“LOM”)
plans. The fair value methodology adopted is categorised as Level 3 in the fair value hierarchy (in accordance with International
Financial Reporting Standards).
The principal CGU, to which mine property, plant and equipment relates is the Group’s Yanfolila Gold Mine in Mali (operating segment).
In determining the recoverable amount of CGU at 31 December 2020, future cash flows were discounted using rates based on the
Group’s estimated weighted average cost of capital. When it is considered appropriate to do so, an additional premium is applied with
regard to the geographic location and nature of the CGU. LOM operating and capital cost assumptions are based on the Group’s latest
budget and LOM plan.
The table below summarises the key assumptions used in the carrying value assessments:
Gold price ($ per ounce):
2020: $1,700
2019: $1,350
Discount rate % (post tax): 2020: 21.5%
2019: 19.6%
Commodity price and foreign exchange rates were estimated with reference to
external market forecasts. The rates applied to the valuation had regard to observable
market data.
In determining the fair value of CGU, the future cash flows were discounted using
rates based on the Group’s estimated real weighted average cost of capital, with an
additional premium applied having regard to the geographic location of the CGU and
Company size.
Operating and capital
costs:
Life-of-mine operating and capital cost assumptions are based on the Group’s latest budget and life of
mine plan.
Having considered the recoverable amount of the CGUs, no impairment loss was recognised for the year ended 31 December 2020.
As always, there is a possibility that changes in circumstances will alter these projections, which may impact on the recoverable amount
of the assets.
Recoverability of other receivables and impairment of financial assets
Government of Mali
Included in other receivables is an amount of CFA 4,968,387,000 approximately $9,302,000 (2019: $10,317,000), due from the
Government of Mali, arising on 2 February 2017 when the Government of Mali exercised its right to acquire an additional 10% of
Societe Des Mines De Komana SA (which would take its total interest in Societe Des Mines De Komana SA to 20%). During the period
CFA 1,056,129,505, approximately $1,883,000 was received from the Government in relation to this receivable. The Group remains in
discussions with the Government of Mali as to the timing and mechanism of payment of the remaining balance. The relevant shares will
not be issued until the payment mechanism of the final balance has been agreed.
92
92
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES The Group considers the receivable to be ‘credit-impaired’ as part of the balance remains unpaid more than 1 year since the
Government of Mali exercised its right. Having considered multiple scenarios including the partial receipt in 2020, on the manner,
timing, quantum and probability of recovery on the receivable, the Group recognised a reduction in the lifetime expected credit losses
previously recognised of $397,000 as at 31 December 2020 (2019: gain of $23,000). The net cumulating lifetime expected credit
loss for the balance is $1,395,000 at 31 December 2020. The allowance for lifetime expected credit losses assessment requires a
significant degree of estimation and judgement.
Deferred tax assets
In assessing the probability of realising potential deferred tax assets, management makes estimates related to expectations of future
taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that
tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives
additional weight to positive and negative evidence that can be objectively verified. Estimates of future taxable income are based
on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. Forecasted cash flows from
operations are based on life of mine projections internally developed and reviewed by management. Weight is attached to tax planning
opportunities that are within the Group’s control and are feasible and implementable without significant obstacles. The likelihood
that tax positions taken will be sustained upon examination by applicable tax authorities is assessed based on individual facts and
circumstances of the relevant tax position evaluated in light of all available evidence. Where applicable tax laws and regulations are
either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that
materially affect the amounts of income tax assets recognised. At the end of each reporting period, the Group reassesses unrecognised
and recognised income tax assets, and there is the possibility that a change in circumstances may impact on the recoverability of the
relevant deferred tax asset.
Following a review of the future profitability of the Malian subsidiary, in light of the relatively high gold price environment being
experienced, deferred tax assets of $684,000 were recognised at 31 December 2020 in respect of the Malian subsidiary. Only a small
portion of the losses were recognised as the recoverability of the remaining balance is not certain. These assets were previously not
recognised due to unpredictability and uncertainty of their timing. The deferred tax has arisen on the temporary differences between the
carrying value of assets and tax written down value of assets.
Rehabilitation provision
The Group assesses its mine rehabilitation provision at each reporting date. Significant estimates and assumptions are made in
determining the provision for mine rehabilitation as there are numerous factors that will affect the ultimate amount payable. These
factors include estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes, cost increases
as compared to the inflation rates (2%) and changes in discount rates (0.39%). These uncertainties may result in future actual
expenditure differing from the amounts currently provided. The provision at reporting date represents management’s best estimate
of the present value of the future rehabilitation costs required.
Approximately $350,000 of liabilities were acquired as part of the Kouroussa Gold Project during the year. Management assessed this
to be reasonable at the acquisition date and further assessment of the amount will be done as development progresses in Guinea.
Kouroussa asset purchase
Following the acquisition of the Kouroussa Gold Project in Guinea, the Directors had to apply judgment and estimations. The Directors
consider the acquisition of Kouroussa Gold Project in Guinea (see note 23 for details) to be an asset purchase as opposed to a
business combination. The Directors also consider fair value of the consideration payable in relation to this acquisition to be as detailed
in note 23.
Fair value of the Cassidy Smelter Royalty
Following the acquisition of Kouroussa Project in Guinea a royalty of $6.8 million was recognised. This represents a 2% smelter royalty
retained by the vendors on all gold sales from the project over and above the first 200,000 ounces of its production and sales, subject
to a maximum of 2.2 million ounces of production and sales.
Significant judgement and estimations were used to determine the fair value of this liability including judgment on likelihood of payment
of this liability, estimating the discounts rates used in determining the net present values of amounts used as well as estimating the
future production profiles. There is significant estimation uncertainty in the calculation of the liability and cost estimates can vary in
response to many factors including timing of reserves growth, as well as commodity prices. Some of the key assumptions used in the
model include average gold production volumes of approximately 100,000 ounces per annum over 10 years, and production needs to
be over 200,000 ounces before the royalty is payable. As part the model, production was assumed to start from 2023 and the royalty
currently estimated to be payable from 2025, with a discount rate of 10%. The model is also subject to gold price changes.
Development of earn-in agreement accounting policy
Following the signing of the earn-in agreement on Dugbe, and without a formal accounting standard guiding these transactions,
judgment had to be applied in what accounting policy to adopt, including estimating the implication of this accounting policy on the
Group’s financial position. Management believe they have adopted a prudent policy that reflects the substance of this transaction.
9393
ANNUAL REPORT + ACCOUNTS 2020 GUINEA
$’000
LIBERIA
$’000
CORPORATE
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(11)
(11)
13
(3)
–
–
–
(1)
–
(1)
3,361
(2,328)
1,033
(2,081)
(8,750)
(9,798)
901
(282)
(17)
–
1,203
(7,993)
–
(7,993)
TOTAL
$’000
185,072
(142,089)
42,983
(2,081)
(8,928)
31,974
2,014
(9,288)
(17)
397
1,203
26,283
(1,135)
25,148
GUINEA
$’000
36,436
(8,882)
27,554
LIBERIA
$’000
66,051
(22,170)
43,881
CORPORATE
$’000
14,200
(6,100)
$’000
292,546
(109,285)
8,100
183,261
GUINEA
$’000
LIBERIA
$’000
CORPORATE
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(44)
(44)
–
–
–
–
–
–
(44)
–
(44)
GUINEA
$’000
–
–
–
LIBERIA
$’000
64,883
(16,045)
48,838
TOTAL
$’000
156,874
(130,807)
26,067
(753)
(12,056)
13,258
2,241
(8,278)
(62)
(4)
23
2,218
9,396
(1,551)
7,845
TOTAL
$’000
261,185
(122,282)
1,809
(1,748)
61
(753)
(9,369)
(10,061)
240
(70)
(62)
(4)
–
2,218
(7,739)
–
(7,739)
CORPORATE
$’000
12,028
(5,816)
6,212
138,903
FINANCIAL STATEMENTS
5
SEGMENTAL ANALYSIS
STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2020
Revenue
Cost of sales
Gross profit
Share based payments
Other administrative expenses
Operating profit/(loss)
Finance income
Finance expense
Share of joint venture loss
Reversal of impairment of financial assets
Gain on financial assets measured at fair value
Profit/(loss) before tax
Tax
Profit/(loss) after tax
STATEMENT OF FINANCIAL POSITION
YEAR ENDED 31 DECEMBER 2020
Segment assets
Segment liabilities
Segment net assets
STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2019
Revenue
Cost of sales
Gross profit
Share based payments
Other administrative expenses
Operating profit/(loss)
Finance income
Finance expense
Share of associate loss
Share of joint venture loss
Reversals in impairment of financial assets
Gain on financial assets measured at fair value
Profit/(loss) before tax
Tax
Profit/(loss) after tax
STATEMENT OF FINANCIAL POSITION
YEAR ENDED 31 DECEMBER 2019
Segment assets
Segment liabilities
Segment net assets
MALI
S’000
181,711
(139,761)
41,950
–
(167)
41,783
1,100
(9,003)
–
397
–
34,277
(1,135)
33,142
MALI
S’000
175,859
(72,133)
103,726
MALI
S’000
155,065
(129,059)
26,006
–
(2,643)
23,363
2,001
(8,208)
–
–
23
–
17,179
(1,551)
15,628
MALI
S’000
184,274
(100,421)
83,853
94
94
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES NON-CURRENT ASSETS FOR THE YEAR ENDING 31 DECEMBER 2020
Intangible exploration and evaluation assets
Intangible assets software
Property, plant and equipment
Right of use assets
Investment in joint ventures
Financial assets at fair value through profit and loss
Deferred tax assets
Segment non-current assets
NON-CURRENT ASSETS FOR THE YEAR ENDING 31 DECEMBER 2019
Intangible exploration and evaluation assets
Intangible assets software
Property, plant and equipment
Right of use assets
Investment in joint ventures
Financial assets at fair value through profit and loss
Segment non-current assets
MALI
$’000
10,456
201
114,714
13,667
–
–
684
139,722
MALI
$’000
9,061
284
129,564
12,638
–
–
151,547
GUINEA
$’000
–
3
35,491
–
–
–
–
35,494
GUINEA
$’000
–
–
–
–
–
–
–
LIBERIA
$’000
65,118
–
–
–
–
–
–
65,118
LIBERIA
$’000
64,798
–
–
–
–
–
64,798
CORPORATE
$’000
–
–
42
130
175
7,721
–
8,068
CORPORATE
$’000
–
–
168
302
99
6,103
6,672
TOTAL
$’000
75,574
204
150,247
13,797
175
7,722
684
248,402
TOTAL
$’000
73,859
284
129,732
12,940
99
6,103
223,017
Geographic information
During the year the Group had four operating segments, with only Mali currently producing gold. Revenues in connection with the
operating segment totalled $181,711,000 (2019: $155,065,000) and were derived from a single external customer. The Group is not
economically dependent on the customer, as gold can be sold through numerous commodity market traders worldwide.
Additionally, during the year sales of Single Mine Origin (“SMO”) gold and gold investment coins (via its UK head office) generated
revenues of $3,361,000 (2019: $1,809,000), and all were derived from a single related customer (note 29) at a premium to the spot
gold price.
Revenues from customers are based on the locations of the customers.
Dore
SMO gold and gold investment coins
Total revenue from customers
6. ADMINISTRATIVE EXPENSES BY NATURE
LOCATION
Puerto Rico
UK
2020
$’000
181,711
3,361
185,072
2019
$’000
155,065
1,809
156,874
Other income
Audit fees, including fees paid to subsidiary auditors (note 7)
Non-audit fees, including fees paid to subsidiary advisors (note 7)
Bank charges
Communications and IT
Depreciation of property, plant and equipment
Insurance
Marketing
Office expenses
Taurus settlement
Other taxes
Professional and consultancy
Rent under operating leases
Staff costs excluding share-based payments and employers NI accrual on share options
Travel and accommodation
Share based payments
Charge of employers NI accrual on share options
Net foreign exchange losses
2020
$’000
(172)
156
5
68
202
318
321
211
16
–
234
1,465
236
4,904
242
2,081
470
252
2019
$’000
(34)
157
19
33
157
312
288
511
133
2,500
621
2,136
188
3,871
465
753
97
602
11,009
12,809
9595
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
7
AUDITOR’S REMUNERATION
Amounts payable to RSM UK Audit LLP and its associates in respect of both audit and non-audit services:
Audit fees
Fees payable to the Company’s auditor for the audit of the annual accounts
Fees payable to the Company’s auditors for the audit of certain subsidiaries
Total audit fees
Non-audit fees payable to associates of the Company’s auditor
Taxation compliance
Taxation advice
Total non-audit fees
8
STAFF COSTS
The average monthly number of employees and directors was:
Directors
Other employees
* Now includes Kouroussa employees from 1 September 2020
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pensions
Charge for share based payments
Charge for potential social security costs related to share based payments
2020
$’000
146
10
156
–
–
–
2020
NUMBER
7
340*
347
2020
$’000
11,092
2,212
86
2,081
470
15,941
2019
$’000
116
9
125
8
1
9
2019
NUMBER
7
258
265
2019
$’000
10,381
1,744
82
753
97
13,057
Within wages and salaries, $1,298,000 (2019: $1,403,000) relates to remuneration payable to directors, included within share-based
payments is a net charge of $1,221,000 (2019: $259,000) under cash-settled share based payment scheme payable to directors,
and within pensions is $14,000 (2019: $34,000) relating to pension contributions in respect of directors.
The total remuneration of the highest paid director is $650,000 (2019: $742,000) comprising $643,000 (2019: $724,000) in relation to
wages and salaries (including vested performance bonuses paid) and pension contributions of $7,000 (2019: $18,000).
The number of directors to whom benefits are accruing under defined contribution pension schemes is 2 (2019: 2).
Included within staff costs is $1,168,000 (2019: $1,232,000) capitalised to intangible exploration and evaluation assets and $1,200,000
(2019: $396,000) capitalised into mine development assets.
9
FINANCE INCOME AND EXPENSE
FINANCE INCOME
Interest on bank deposits
Foreign exchange gain
Gain on revaluation of warrants
FINANCE EXPENSE
Interest on borrowings
Amortisation of borrowing costs (note 17)
Unwinding of discount on rehabilitation provision
Foreign exchange loss
2020
$’000
127
1,549
338
2,014
2020
$’000
5,020
1,128
257
2,883
9,288
2019
$’000
271
1,651
319
2,241
2019
$’000
5,406
962
845
1,065
8,278
Foreign exchange gains and losses arose on non-functional currency bank deposits and foreign currency loans.
96
96
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES 10 TAX
The tax charge for the year is summarised as follows:
Minimum tax pursuant to Malian law
Deferred tax income
Tax expense for the year
2020
$’000
1,819
(684)
1,135
The taxation charge for the period can be reconciled to the profit per the statement of comprehensive income as follows:
Profit before tax
Tax expense at the rate of tax 30.00% (2019: 30.00%)
Tax effect of non-deductible items
Origination and reversal of temporary differences
Deferred tax asset (recognised)/not recognised
Recognised deferred tax assets - initial recognition
Minimum tax pursuant to Malian law
Tax expense for the year
2020
$’000
26,283
7,885
(5)
(4,152)
(3,728)
(684)
1,819
1,135
2019
$’000
1,551
–
1,551
2019
$’000
9,396
2,819
515
(7,570)
4,236
–
1,551
1,551
The Group’s primary tax rate is aligned with its operations in Mali of 30% (2019: 30%). The taxation of the Group’s operations in Mali
are aligned to the Mining Code of Mali 1999 under which tax is charged at an amount not less than 1% (2019:1%) of turnover and not
more than 30% of taxable profits.
11 PROFIT PER ORDINARY SHARE
Basic profit per ordinary share is calculated by dividing the net profit for the year attributable to ordinary equity holders of the parent by
the weighted average number of ordinary shares outstanding during the year.
The calculation of the basic and diluted profit per share is based on the following data:
Profit
Profit for the purposes of basic profit per share being net profit attributable to equity holders of the
parent
19,022
5,422
2020
$’000
2019
$’000
NUMBER OF SHARES
Weighted average number of ordinary shares for the purposes of basic profit per share
Weighted number of shares to be issued as part of asset purchase
Adjustments for share options and warrants
Weighted average number of ordinary shares for the purposes of diluted profit per share
PROFIT PER ORDINARY SHARE
Basic
Diluted
2020
NUMBER
2019
NUMBER
355,380,149 353,815,287
–
8,347,731
11,685,100
11,835,883
378,901,132 362,163,018
2020
$ CENTS
5.35
5.02
2019
$ CENTS
1.53
1.50
At the reporting date there were 50,761,957 (2019: 15,549,307) potentially dilutive ordinary shares. Potentially dilutive ordinary shares
include share options issued to employees and directors, warrants issued and in 2020 includes the 35,248,441 shares to be issued as
part of the Kouroussa Project acquisition.
9797
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
12
INVESTMENTS
NAME OF ENTITY
PLACE OF BUSINESS/COUNTRY
OF INCORPORATION
% OF OWNERSHIP INTEREST
2020
%
2019
$
NATURE OF
RELATIONSHIP
MEASUREMENT METHOD
Cora Gold Limited
Betts Investments Limited*
British Virgin Islands
United Kingdom
11.36%
49%
18% Investment 1
19.36% Joint venture 2
Bunker Hill Mining Corporation Canada
8.58%
5.46% Investment 3
Fair value through profit or
loss
Equity method
Fair value through profit or
loss
1
2
3
Cora Gold Limited (“Cora”) is incorporated and domiciled in the British Virgin Islands with securities traded on the AIM market of the London Stock Exchange. The principal
activity of Cora and its subsidiaries is the exploration and development of mineral projects, with a primary focus in West Africa.
Betts Investments Limited (“BIL”) has been established for the marketing of gold together with other precious metals investment products, and the development of the Single
Mine Origin business.
Bunker Hill Mining Corporation (“Bunker Hill”) is listed on the Canadian Securities Exchange. The principal activity of Bunker Hill is exploration and development of the historic
Bunker Hill mine.
* Private entity – no quoted price available.
Investments:
Investments as at 31 December 2020 totalled $7,896,000 (2019: $6,202,000).
Investment in associates and joint ventures (a)
Financial assets at fair value through profit and loss (b)
(a)
Investment in associates and joint ventures:
INVESTMENTS:
Opening carrying value
Acquisition at cost
Share of loss
Closing carrying value
2020
$’000
175
7,721
7,896
2019
$’000
99
6,103
6,202
BETTS INVESTMENTS LIMITED
2020
$’000
99
93
(17)
175
2019
$’000
103
–
(4)
99
Summarised financial statement information (100% share) of joint ventures, based on their financial statements, and a reconciliation
with the carrying amount of the investment in the Group’s consolidated financial statements, are set out below:
SUMMARISED STATEMENT OF COMPREHENSIVE INCOME:
Loss before income tax
Income tax expense
Loss for the year
Group’s % ownership
Group’s share of loss
SUMMARISED STATEMENT OF FINANCIAL POSITION:
Non-current assets
Current assets
Current liabilities
Net assets
Group’s % ownership
Group’s share of net assets
RECONCILIATION TO CARRYING AMOUNTS:
Group’s share of net assets (as shown above)
Goodwill
Closing carrying value
98
98
BETTS INVESTMENTS LIMITED
2020
$’000
(34)
–
(34)
49%
(17)
$’000
18
113
(17)
114
49%
56
$’000
56
119
175
2019
$’000
(18)
–
(18)
19.36%
(4)
$’000
42
23
(1)
64
19.36%
12
$’000
12
87
99
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES Betts Investments Limited (“BIL”)
On 23 May 2018 the Group entered into a joint venture agreement (“JV Agreement”) with Stephen Betts and Sons Limited (“SBS”)
and Betts Investments Limited (“BIL”). Daniel Betts and Stephen Betts who are both directors of the Company, are also directors of and
shareholders in SBS.
Under the JV Agreement, the Group invested $105,000 (£75,000) for a 19.36% interest in BIL, and in April 2020 the Group exercise
its option to increase its stake to 49% for a further investment of $93,000 (£75,000). The Group has agreed to sell Hummingbird gold
investment coins to SBS to fulfil orders placed by customers via BIL. Additionally, the Group provides marketing support and treasury
services to BIL. SBS shall be responsible for the fulfilment of all orders of gold and other precious metals investment products and BIL
will receive a commission equal to 50% of the gross margin on all sales of gold and other precious metals investment products.
(b) Financial assets at fair value through profit and loss:
Opening position
Additions
Conversion of loans
Accrued interest
Gains/(loss) through profit or loss
Closing carrying value
CORA GOLD SHARES
BUNKER HILL –
SHARES AND WARRANTS1
BUNKER HILL –
CONVERTIBLE LOAN
TOTAL
2020
$’000
1,731
–
–
977
2,708
2019
$’000
1,363
402
–
–
(34)
1,731
2020
$’000
2,297
300
2,400
–
16
2019
$’000
–
–
100
–
2,197
2020
$’000
2,075
–
(2,400)
115
210
5,013
2,297
–
2019
$’000
1,903
–
(100)
217
55
2,075
2020
$’000
6,103
300
–
115
1,203
7,721
2019
$’000
3,266
402
–
217
2,218
6,103
1 Warrants are valued using the Black Scholes model.
Cora Gold Limited (“Cora”)
On 11 April 2017 the Group entered into a sale and purchase agreement to sell two exploration companies containing exploration
permits, Hummingbird Exploration Mali SARL (“HEM”) and Sankarani Resources Mali SARL (“SKR”), to Cora Gold Limited (“Cora”)
in exchange for a 50% shareholding in Cora.
In August 2020 the Group sold its warrants to subscribe for a further 4,730,000 shares at a price of 10 pence per share for a
consideration of $150,000. This warrant was previously regarded as immaterial and not recognised in the financial position and hence
the full sales proceeds has been recognised as other income in the statement of comprehensive income.
The investment in Cora Gold has been deemed to be a level 1 asset under the fair value hierarchy. This instrument has been valued
using publicly quoted share price. The Group recognised a fair value gain of $977,000 (2019: loss of $34,000).
The value of these shares on 28 April 2021 was $2.5 million.
Bunker Hill Mining Corporation – shares, warrants and convertible loans
The Company entered into an arm’s length convertible loan arrangement, with Bunker Hill Mining Corp (“Bunker Hill”), a Canadian
listed exploration and development company, advancing $1,500,000 and $500,000 on 18 June 2018 and 9 August 2018 respectively.
The loan was repayable by 30 June 2020 and attracted interest of 10% p.a. calculated daily from date of advance until repayment or
conversion. The loans and accrued interest were convertible to common shares at CAD$8.50 and CAD$4.50 per share, respectively.
On 28 January 2020, the Group acquired a further 1,392,857 shares in the company for a total consideration of $600,000 at a price
of $0.43 (CAD$0.56) a share, split as conversion of loan of $300,000 due from Bunker Hill as well as cash investment of $300,000.
The loan conversion rights were then extended by one month to 31 July 2020. On 5 October 2020, the Group converted the
final outstanding loan balance of $2,100,00 due from Bunker Hill for 5,572,980 shares at a cost of C$0.5 per share at the time
of conversion.
As part of this investment the Group also has the option to acquire an additional 2,660,000 shares at a cost of CAD$0.59 per share
before 31 December 2025. The investment is carried at fair value through profit and loss.
The shares in Bunker Hill have been deemed to be a level 1 asset under the fair value hierarchy. This instrument has been valued using
publicly quoted share price. The Group regards the warrants to be level 2 asset under the fair value hierarchy. These have been valued
using a combination of quoted prices as well as calculations under the Black Scholes model. The total investments on 31 December
2020 are split as follows, level 1 shares $3,928,000 and level 2 warrants $1,085,000.
The value of these shares and warrants on 28 April 2021 was $3.2 million.
9999
ANNUAL REPORT + ACCOUNTS 2020
FINANCIAL STATEMENTS
13
INTANGIBLE ASSETS
(a)
Intangible exploration and evaluation assets
Cost
At 31 December 2018
Additions for the year
At 31 December 2019
Additions for the year
At 31 December 2020
LIBERIA
$’000
MALI
$’000
TOTAL
$’000
61,775
3,023
64,798
320
65,118
7,396
1,665
9,061
1,395
10,456
69,171
4,688
73,859
1,715
75,574
Exploration in Liberia is undertaken by Hummingbird Resources (Liberia) Inc, a wholly owned subsidiary. The intangible exploration and
evaluation assets in respect of Liberia principally relate to the Dugbe Gold Project (“Dugbe”). As announced on 1 May 2019 (note 31),
the Group signed a 25-year renewable Mineral Development Agreement (“MDA”) with the with the Government of Liberia (“GoL”),
covering a land package of approximately 2,000km2, which includes the Group’s 4.2Moz Dugbe Project. In accordance with the MDA,
the GoL will be granted a 10% free carried shareholding in Hummingbird Resources (Liberia) Inc.
On 4 June 2020 the Company announced an earn-in agreement with ARX Resources Limited (“ARX”) in respect of the Dugbe Gold
Project in Liberia (“Dugbe”). The earn-in agreement requires ARX to complete a Definitive Feasibility Study, carry out a significant
exploration programme and cover all project costs over the 2 year earn-in period (the “Earn-in”). The Earn-in entitles ARX to earn up to
a 49% interest in the Dugbe. ARX have advanced over $5,500,000 to Liberia to 31 December 2020. However, in line with accounting
guidelines, this spend is not reflected in the additions above as the amount was not effectively spent by Hummingbird Resources as
was just passing through from ARX. Upon satisfaction of all the earn-in conditions ARX will be granted the 49% stake in Dugbe.
On 3rd November 2020 Hummingbird Resources (Liberia) Inc exercised its option to acquire the Central Licence (an exploration licence
surrounded by the MDA area), which was subsequently absorbed into the MDA.
Intangible exploration and evaluation assets in respect of Mali principally relate to the Yanfolila Gold Project. Exploration licences in Mali
provide the Government with the right to a 10% free carried interest and the right to buy a further 10% interest.
(b)
Intangible software assets
Cost
At 31 December 2018
Reclassification from PPE
At 31 December 2019
Asset purchase
Additions
At 31 December 2020
Accumulated amortisation
At 31 December 2018
Charge for the year
At 31 December 2019
Charge for the year
At 31 December 2020
Carrying amount
At 31 December 2019
At 31 December 2020
TOTAL
$’000
176
227
402
7
4
413
58
60
118
91
209
284
204
Intangible software assets include software purchased for the operations of the mine. Amortisation charge of $4,000 was capitalised
into to mine development assets during the year.
100
100
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES 14 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise owned and leased assets that do not meet the definition of investment property. The net book
value of property plant and equipment is summarised as follows:
Right-of-use assets (note 19)
Property, plant and equipment – owned
(a) Property, plant and equipment - owned
2020
$’000
13,797
150,247
164,004
2019
$’000
12,940
129,732
142,672
MINE
DEVELOPMENT
$'000
MINE CLOSURE
$'000
PLANT &
EQUIPMENT
$'000
INFRASTRUCTURE
$'000
MOBILE
& OTHER
EQUIPMENT
$'000
ASSETS UNDER
CONSTRUCTION
$'000
OTHER
$'000
TOTAL PPE
$'000
Cost
At 31 December 2018
Additions
Transfers of finished PPE
Reclassification to
intangibles
Disposals
At 31 December 2019
Asset purchase (note 23)
Additions
Transfers of finished PPE
Disposals
90,013
2,436
336
–
–
92,785
29,510
4,260
–
–
At 31 December 2020
126,555
Accumulated
depreciation
At 31 December 2018
Charge for the year
Disposals
At 31 December 2019
Charge for the year
Disposals
At 31 December 2020
Carrying amount
At 31 December 2019
At 31 December 2020
13,149
16,061
–
29,210
16,087
–
45,297
13,229
1,018
–
–
–
14,247
350
–
–
–
14,597
1,801
2,243
–
4,044
2,033
–
6,077
34,149
10,150
2,229
–
–
46,528
10
3
73
–
46,614
4,614
6,476
–
11,090
7,098
(60)
18,128
17,509
1,833
4,826
–
–
24,168
99
2,791
–
–
27,058
2,758
3,045
–
5,803
3,686
–
9,489
2,581
–
–
–
–
2,581
845
535
–
(73)
3,888
2,388
57
–
2,445
299
–
2,744
7,666
1,799
(7,391)
(227)
–
1,847
–
11,454
(73)
–
13,228
–
–
–
–
–
–
–
915
23
–
–
(5)
933
–
20
–
–
953
629
141
(5)
765
146
–
911
166,062
17,259
–
(227)
(5)
183,089
30,814
19,063
–
(73)
232,893
25,339
28,023
(5)
53,357
29,349
(60)
82,646
63,575
81,258
10,203
8,520
35,438
28,486
18,365
17,569
136
1,144
1,847
13,228
168
42
129,732
150,247
Amortisation charge of $240,000 was capitalised into to mine development assets during the year.
101101
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
15 SUBSIDIARIES
The Company had investments in the following subsidiary undertakings as at 31 December 2020, all of which have been included in
these consolidated financial statements:
NAME
Directly held
Trochilidae Resources Limited
Falcon Cliff,Palace Road, Douglas, Isle of Man, IM2 4LB
Hummingbird Resources (Liberia) Inc.
Hummingbird House, Sophie Area, Congo Town, Monrovia, Liberia
Afro Minerals Inc.
Hummingbird House, Sophie Area, Congo Town, Monrovia, Liberia
Golden Grebe Mining Limited
46-63 Spencer Street, Hockley, Birmingham, England BD18 6DE,
UK
Eagle Mining Limited
46-63 Spencer Street, Hockley, Birmingham, England BD18 6DE,
UK
Indirectly held
Deveton Mining Company
Hummingbird House, Sophie Area, Congo Town, Monrovia, Liberia
Sinoe Exploration Limited
Warren & Carrey Street Intersection, Congo Town, Monrovia, Liberia
Hummingbird Security Limited
Hummingbird House, Sophie Area, Congo Town, Monrovia, Liberia
Intervest Inc
Hummingbird House, Sophie Area, Congo Town, Monrovia, Liberia
Bentley International Trading Corporation
Hummingbird House, Sophie Area, Congo Town, Monrovia, Liberia
Glencar Mining Limited
10 Earlsfort Terrace, Dublin 2, DO2 T380, Ireland
Centrebind Agency Limited
17 GR.Xenopolou, 3106 Limasol, Cyprus
Glencar International (BVI) Limited
Craigmuirr Chambers, Road Town, Tortola, BVI
Glencar Mali SARL
Sebenikoro Villa Fatoumata Bangoura Cissoko, Lot B11 Commune
iv,
Bamako, Mali
Société des Mines de Komana SA 1
Sebenikoro Villa Fatoumata Bangoura Cissoko, Lot B11 Commune
iv,
Bamako, Mali
Sunangel Resources Limited
Falcon Cliff,Palace Road, Douglas, Isle of Man, IM2 4LB
Sunangel Resources SARL
09 BP 399 Ouagadougou 09, Burkina Faso
Yanfolila Mining Limited
Falcon Cliff,Palace Road, Douglas, Isle of Man, IM2 4LB
Yanfolila Finance Limited
Falcon Cliff,Palace Road, Douglas, Isle of Man, IM2 4LB
Yanfolila Holdings Limited
Falcon Cliff,Palace Road, Douglas, Isle of Man, IM2 4LB
Kouroussa Gold Limited
Falcon Cliff,Palace Road, Douglas, Isle of Man, IM2 4LB
Kouroussa Mining Limited
Falcon Cliff,Palace Road, Douglas, Isle of Man, IM2 4LB
Cassidy Gold Guinea SA 2
Landreah Cite Ministerielle, Conakry Republique de Guniee,
Kouroussa Gold Mining SA 2
Landreah Cite Ministerielle, Conakry Republique de Guniee,
COUNTRY OF
INCORPORATION
AND OPERATION
Isle of Man
Liberia
Liberia
United Kingdom
United Kingdom
Liberia
Liberia
Liberia
Liberia
Liberia
Ireland
Cyprus
British Virgin
Islands
Mali
PROPORTION
OF VOTING
INTEREST %
– 2020
PROPORTION
OF VOTING
INTEREST %
–2019
ACTIVITY
100
100
80
100
100
80
90
100
100
100
100
100
100
100
100
Intermediate holding &
service company
100
Exploration & development
80
100
100
80
90
100
100
100
100
100
100
100
Dormant
Intermediate holding
company
Dormant
Dormant
Dormant
Security
Dormant
Dormant
Intermediate holding
company
Intermediate holding
company
Intermediate holding
company
Exploration
Mali
90
90
Mining
Isle of Man
Burkina Faso
Isle of Man
Isle of Man
Isle of Man
Isle of Man
Isle of Man
Guinea
Guinea
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
–
–
Intermediate holding
company
Exploration
Intermediate holding
company
Finance company
Intermediate holding
company
Intermediate holding
company
Intermediate holding
company
Exploration
Mining
1 On 2 February 2017 the Government of Mali exercised its right to participate in the Yanfolila project by acquiring in the subsidiary;
a 10% free carried interest (pursuant to the applicable mining law); and
i)
ii) a 10% additional interest (for agreed consideration). The Group remains in discussions with the Government of Mali as to the timing and mechanism of payment for the
additional interest. The relevant shares will not be issued until the payment mechanism has been agreed.
The Government of Mali’s participation interest is considered a non-controlling interest, being a change in the ownership of a subsidiary that does not result in a change in
control.
2
The Group acquired the Guinea subsidiaries during the year. Refer to note 23 for further details. As of 31 December 2020, the Group was still in process of obtaining the related
mining licences for the Kouroussa Gold Project. This mining licence is now held by a new operating company, Kouroussa Gold Mining SA in which the Government of Guinea is
expected to hold up to a 35% interest.
102
102
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES
Additionally, as of 31 December 2020 the Group had a 11.38% (2019: 18%) investment in Cora Gold Limited, 49% (2019: 19.36%)
investment in Betts Investments Limited and a 8.58% (2019: 5.46%) investment in Bunker Hill Mining Corporation (note 12).
Non-controlling interests
Société des Mines de Komana SA in which the NCI is 20% (refer above).
Movement in NCI during the year are as follows:
At 31 December 2018
Profit attributable to NCI
At 31 December 2019
Profit attributable to NCI
31 December 2020
$’000
1,227
2,423
3,650
6,126
9,776
Summarised financial information of the subsidiary adjusted for Group accounting policies, prior to elimination of intra-group items is set
out below:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Profit after tax
16 CURRENT ASSETS
Inventory
Doré, refined gold, SMO gold, gold grain and coins
Gold in process
Stockpiled ore
Consumables
2020
$’000
176,815
35,921
(42,197)
(28,944)
141,595
2020
$’000
31,184
31,184
2020
$’000
3,340
1,869
10,891
4,252
20,352
2019
$’000
190,230
32,590
(32,463)
(67,185)
123,172
2019
$’000
12,117
12,117
2019
$’000
4,548
1,207
10,149
2,178
18,082
At 31 December 2020, inventory included a provision of $nil (2019: $nil) to adjust finished gold and gold in process inventory to net
realisable value, being a provision of $nil (2019: $nil) and $nil (2019: $nil) respectively.
Cost of inventories of $123,181,000 (2019: $111,835,000) were recognised within cost of sales during the year.
Trade and other receivables
Other receivables
Less: Allowance for expected credit losses
Net other receivables
Prepayments and accrued income
VAT recoverable
2020
$’000
11,266
(1,395)
9,871
1,785
1,068
12,724
2019
$’000
11,522
(1,792)
9,730
1,011
816
11,557
Government of Mali
Included in other receivables is an amount of CFA 4,968,387,000, approximately $9,302,000 (2019: $10,318,000), due from the
Government of Mali, arising on 2 February 2017 when the Government of Mali exercised its right to acquire an additional 10% of
Societe Des Mines De Komana SA (which would take its total interest in Societe Des Mines De Komana SA to 20%). During the period
CFA 1,656,129,505, approximately $1,883,000 was received in relation to this receivable. The Group remains in discussions with the
Government of Mali as to the timing and mechanism of payment of the remaining balance. The relevant shares will not be issued until
the mechanism on payment of the remaining balance has been agreed.
103103
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
Having considered multiple scenarios on the manner, timing, quantum and probability of recovery on the receivable, the Group
recognised a lifetime expected credit reversal of $397,000 (2019: gain of $23,000). The net cumulating lifetime expected credit loss for
the balance is $1,395,000 at 31 December 2020. The allowance for lifetime expected credit losses assessment requires a significant
degree of estimation and judgement.
Refer to note 28 for a reconciliation of lifetime expected credit losses.
Cash and cash equivalents
Cash and cash equivalents as at 31 December 2020 of $6,552,000 (2019: $4,398,000) comprising cash held by the Group.
Restricted cash and cash equivalents
Restricted cash and cash equivalents of $4,516,000 (2019: $4,131,000), is cash held in an escrow account as part of the security
for the Coris Bank loan (note 17).
Net debt reconciliation
Unrestricted cash
Restricted cash
Total cash & cash equivalents
Borrowings (note 17)
Lease liabilities (note 19)
Net debt
AT 1 JANUARY
2020
$’000
ACQUIRED AS
PART OF ASSET
PURCHASE
$’000
4,398
4,131
8,529
(40,000)
(12,594)
(44,065)
17
–
17
–
–
17
CASH FLOW
$’000
2,152
–
2,152
29,252
13,864
45,286
FOREIGN
EXCHANGE
MOVEMENT
$’000
AMORTISATION
OF ISSUE
COSTS/OTHER 1
$’000
AT 31 DECEMBER
2020
$’000
(15)
385
370
(1,332)
–
–
–
–
(1,128)
(14,545)
6,552
4,516
11,068
(13,208)
(13,275)
(962)
(15,673)
(15,415)
1
Included within the other category on lease liabilities is $12,963,000 additions to liabilities as a result of the one year extension to the mining contract in Mali as well as
$1,201,000 unwind of discount. Refer to note 19.
Unrestricted cash
Restricted cash
Total cash & cash equivalents
Borrowings (note 17)
Lease liabilities (note 19)
AT 1 JANUARY
2019
$’000
ADOPTION OF
IFRS 16
$’000
17,320
4,210
21,530
(60,931)
–
–
–
–
–
(24,959)
CASH FLOW
$’000
(11,858)
–
(11,858)
20,809
11,871
Net debt
(39,401)
(24,959)
20,822
17. BORROWINGS
At 1 January 2020
Issue costs amortised in the year
Interest charged during the year
Principal & interest repayments during the year
Foreign exchange loss during the year
Total borrowings at 31 December 2020
Analysed as:
Current
Non-current
FOREIGN
EXCHANGE
MOVEMENT
$’000
AMORTISATION
OF ISSUE
COSTS/OTHER
$’000
AT 31 DECEMBER
2019
$’000
(1,064)
(79)
(1,143)
1,246
–
103
–
–
–
(1,124)
494
4,398
4,131
8,529
(40,000)
(12,594)
(630)
(44,065)
CORIS SENIOR
LOAN FACILITY
$’000
CORIS SECOND
BALL MILL
FACILITY
$’000
TOTAL
BORROWINGS
$’000
31,550
914
2,076
(23,445)
1,213
12,308
12,308
–
8,450
214
471
(8,354)
119
900
900
–
40,000
1,128
2,547
(31,799)
1,332
13,208
13,208
–
Coris Senior Loan Facility
On 11 April 2017, the Group’s subsidiary, Société des Mines de Komana SA (“SMK”) entered into a senior secured term debt facility
with Coris Bank International (“Coris”) for CFA 37,000,000,000 (approximately $60,000,000). On 10 April 2017 SMK drew down the
CFA 15,500,000,000 (approximately $25,000,000) and on 4 July 2017 drew down the remaining CFA 21,500,000,000 (approximately
$35,000,000). The debt facility has the following key terms:
– A 4 year term.
– Interest at 9% per annum (payable monthly).
– Principal deferral period of 12 months from first draw down, payable monthly thereon.
104
104
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES Coris Second Ball Mill Facility
On 26 November 2019, following approval for the construction of the Second Ball Mill at the Yanfolila Mine, the Group’s subsidiary,
SMK, entered into a senior secured term debt facility with Coris for CFA 5,500,000,000 (approximately $9,600,000). On 28 December
2019 SMK drew down the balance of the facility. The debt facility has the following key terms:
– A 2 year term.
– Interest at 9% per annum (payable monthly).
– Principal deferral period of 12 months from first draw down, payable monthly thereon.
Coris Overdraft Facility
On 18 November 2019, the Group’s subsidiary, SMK entered into an overdraft facility with Coris for CFA 5,500,000,000 (approximately
$9,400,000 at 31 December 2020 exchange rate), to provide additional working capital flexibility. This facility was renewed on 18
December 2020. The Coris Overdraft Facility carries an interest rate of 9% per annum and remains available twelve months from date
of renewal.
Security for the borrowings has been granted to Coris over the assets of SMK, a parent company guarantee, and restricted cash held
in an escrow account (note 16).
The Group records and measures borrowings at amortised cost, using the effective interest rate method.
18 PROVISIONS
Rehabilitation provision
The Group makes full provision for the future cost of rehabilitating mine sites and related production facilities on a discounted basis at
the time of developing the mines and installing and using those facilities.
The rehabilitation provision represents the present value of rehabilitation costs relating to mine sites, which are expected to be incurred
up to 2029. These provisions have been created based on the Group’s internal estimates. Assumptions based on the current economic
environment have been made, which management believes are a reasonable basis upon which to estimate the future liability. These
estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual rehabilitation costs will
ultimately depend upon future market prices for the necessary decommissioning works required which will reflect market conditions
at the relevant time. Furthermore, the timing of rehabilitation is likely to depend on when the mines cease to produce at economically
viable rates. This, in turn, will depend upon future gold prices, which are inherently uncertain.
At 1 January 2019
Arising during the year
Remeasurement
Unwinding of discount
At 31 December 2019
Asset purchase
Utilised during the year
Remeasurement
Unwinding of discount
At 31 December 2020
Analysed as:
Current
Non-current
At 31 December 2020
REHABILITATION
PROVISION
$’000
13,541
740
278
320
14,879
350
(36)
675
257
16,125
587
15,538
16,125
105105
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
19 LEASES
The Group leases mining equipment, power plant generators and office space with terms of two to five years. Lease payments
represent rentals payable by the Group for the Yanfolila Gold Mine power plant generators, fixed mining equipment in addition to lease
costs for properties located in Liberia, Mali, and the head office in the UK. The Group has elected not to recognise right of use assets
for lease of low value and/or short-term leases.
(a) Right of use assets
Information about leased assets for which the Group is a lessee is presented below:
PLANT &
EQUIPMENT
$’000
OFFICES
$’000
TOTAL
$’000
Cost
Initial adoption of IFRS 16, at 1 January 2019
Remeasurements
At 31 December 2019
Arising during the year
Remeasurement
At 31 December 2020
Depreciation
At 1 January 2019
Charge for the year
At 31 December 2019
Charge for the year
At 31 December 2020
Carrying amount at 31 December 2019
Carrying amount at 31 December 2020
(b) Lease liabilities
24,482
(1,005)
23,477
12,963
379
36,819
–
10,839
10,839
12,312
23,151
12,638
13,668
477
(2)
475
–
–
475
–
173
173
173
346
302
129
Maturity analysis
At the reporting date, the Company had outstanding commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
Within one year
In the second to fifth years inclusive
Greater than five years
Total undiscounted lease liabilities at 31 December
Lease liabilities included in the statement of financial position at 31 December 2020 were:
At 1 January
At adoption of IFRS 16
Arising during the year
Remeasurement
Lease liability and lease interest paid during the year
Interest expense on lease liabilities
At 31 December
Analysed as:
Current
Non-current
At 31 December
2020
$’000
11,011
4,795
–
15,806
2020
$’000
12,594
–
12,963
380
(13,864)
1,201
13,274
10,894
2,380
13,274
24,959
(1,007)
23,952
12,963
379
37,294
–
11,012
11,012
12,485
23,497
12,940
13,797
2019
$’000
8,970
4,970
–
13,940
2019
$’000
–
24,959
–
(1,007)
(11,871)
513
12,594
8,933
3,661
12,594
Amounts recognised in statement of comprehensive income includes depreciation on right of use assets of $12.5 million (2019: $11
million) and $1,201,000 (2019: $513,000) interest expense on lease liabilities. Low value and short-term lease charges of $46,000
(2019: $16,000) were also charged into the income statement during the year. A further $23,000 (2019: $62,000) was capitalised into
exploration and evaluation assets in respect of Liberian based short-term leases.
Total of $13,864,000 (2019: $11,871,000) was paid during in respect of lease principal and interest, and this is reflected in statement
of cash flows under financing activities.
106
106
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES 20 DEFERRED TAX
Differences between IFRS and statutory tax rules give rise to temporary differences between the carrying values of certain assets and
liabilities for financial reporting purposes and for income tax purposes.
The taxation of the Group’s operations in Mali are aligned to the Mining Code of Mali 1999 under which tax is charged at an amount
not less than 1% of turnover and not more than 30% of taxable profits.
Following a review of the future profitability of the Malian subsidiary, in light of the relatively high gold price environment being
experienced, deferred tax assets of $684,000 were recognised at 31 December 2020 in respect of the Malian subsidiary. Only a small
portion of the losses were recognised as the recoverability of the remaining balance is not certain. These assets were previously not
recognised due to unpredictability and uncertainty of their timing. Further, $4,991,000 of previously unrecognised deferred tax assets
were utilised to offset tax. The deferred tax has arisen on the temporary differences between the carrying value of assets and tax written
down value of assets.
No deferred tax assets have been recognised in respect of the remaining deferred tax assets of $15,145,000, as the recovery is
dependent on the future profitability, the timing and the certainty of which cannot reasonably be foreseen.
Following the acquisition of Kouroussa Project in Guinea, and in light of a new mining company being required for the mining permit,
and although it should be possible, but not certain, to transfer historic costs to the new company, management have assumed that
any losses within Cassidy Gold SA will not be available for future profits. This position will be assessed as the new mining licence is
granted and when the transfer of balances between the two entities is approved. Hence no deferred tax assets and liabilities have been
recognised with respect to Guinea.
The movement in deferred tax assets and liabilities during the year is as follows:
UNRECOGNISED
RECOGNISED
DEFERRED TAX
ASSETS
$’000
DEFERRED TAX
LIABILITY2
$’000
DEFERRED TAX
ASSETS
$’000
DEFERRED TAX
LIABILITY2
$’000
NET DEFERRED
TAX ASSETS
$’000
At 31 December 2018
Revisions on earlier taxes rates
Tax losses arising during the year
Accelerated tax depreciation
At 31 December 2019
Adjustment
Reclassification1
Tax losses arising during the year
Tax losses utilised during the year
Accelerated tax depreciation
At 31 December 2020
21,608
–
10,239
–
31,847
279
(17,781)
800
–
–
15,145
(5,832)
–
–
(6,629)
(12,461)
3,640
8,821
–
–
–
–
–
–
–
–
–
–
17,781
–
(4,991)
–
12,790
Unrecognised tax losses utilised during the year
Initial recognition of deferred tax assets
Tax losses arising during the year
Accelerated tax depreciation
Effect of different tax rates
Deferred tax assets (recognised)/not recognised (note 10)
–
–
–
–
–
–
(8,821)
–
–
(3,285)
(12,106)
2020
$’000
(4,991)
(684)
800
(3,285)
463
(7,697)
15,776
–
10,239
(6,629)
19,386
3,919
–
800
(4,991)
(3,285)
15,829
2019
$’000
–
–
10,239
(6,629)
626
4,236
1
Following a review of the future profitability of the Malian subsidiary, in light of the relatively high gold price environment being experienced, management have concluded
appropriate to recognise the deferred tax assets and liabilities of the Malian subsidiary.
2 Net deferred tax asset of $684,000 was recognised in the statement of financial position as at 31 December 2020.
107107
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
21 TRADE AND OTHER PAYABLES
Trade payables
Other taxes and social security
VAT payable
Accruals
Other payables
2020
$’000
18,687
5,709
440
13,546
1,058
39,440
2019
$’000
15,809
6,125
354
16,611
910
39,809
The average credit period taken for trade purchases is 55 days (2019: 46 days). Where possible the Group seeks to settle agreed
payables within the contractual timeframe. The Directors consider that the carrying amount of trade and other payables approximates
to their fair value.
22 OTHER FINANCIAL LIABILITIES
Royalty liability – Kouroussa
Royalty liability – Anglo Pacific Group PLC
2020
$’000
6,836
15,000
21,836
2019
$’000
–
15,000
15,000
Royalty liability – Anglo Pacific Group PLC
On 17 December 2012 the Group entered into a royalty financing arrangement with APG AUS No 5 Pty Limited (a wholly owned
subsidiary of Anglo Pacific Group PLC (“APG”) in relation to Dugbe. Under the terms of the agreement APG agreed to advance $15m
in three equal tranches subject to the satisfaction of certain criteria. The first tranche of $5m was received on 14 March 2013 and the
second tranche of $5m was received on 10 April 2013, the third tranche of $5m was received on 13 March 2014 giving a total of $15m.
During that same year the advances were converted into a 2% net smelter return royalty from any sales of product mined within a
20km radius of Dugbe. After an initial grace period of six months following the commencement of commercial production, in the event
that quarterly sales of gold produced are less than 50,000 oz, additional quarterly payments will be required until such time as the
cumulative royalty paid is $15m (the maximum total payment in any such quarter is equivalent to the royalty that would have arisen on
sales of 50,000 oz of gold). Following this period the royalty is 2% except where both the average gold price is above $1,800 and sales
of gold are less than 50,000 oz, in which case it increases to 2.5% in respect of that quarter.
The amount advanced of $15m is repayable in certain limited circumstances, such as a change in control, and therefore is treated as
a financial liability. The amounts advanced are secured by legal charges over the assets of Hummingbird Resources (Liberia) Inc and
Sinoe Exploration Limited, and a legal charge over the shares of Hummingbird Resources (Liberia) Inc, Sinoe Exploration Limited and
Golden Grebe Mining Limited. Additionally, the Company has provided a guarantee to APG regarding the obligations of its subsidiaries
in respect of this arrangement.
Royalty liability – Kouroussa
Following the acquisition of the Kouroussa Project in Guinea a royalty of $6.8 million was recognised. This represents a 2% smelter
royalty retained by the vendors on all gold sales from the project over and above the first 200,000 ounces of its production and
sales, subject to a maximum of 2.2 million ounces of production and sales. The amount of royalty was estimated using the projected
production over the life of mine.
108
108
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES 23 KOUROUSSA GUINEA ASSET PURCHASE
On 1 September 2020 Hummingbird Resources plc, through its wholly owned subsidiary, Trochilidae Resources Limited, acquired
100% of the shares of Cassidy Gold Guinea SA, the Kouroussa Gold Project, located in Guinea from Cassidy Gold Corp, a company
incorporated in British Columbia, Canada. The Directors consider it to be an asset purchase under IFRS 3 as opposed to a business
combination due the fact that on date of acquisition, Cassidy did not have any mining permit and further studies were required ahead
of a construction decision.
The consideration for this purchase is as follows:
■
Initial consideration of £10 million, which was satisfied through the issue of 35,248,441 new Ordinary Shares in the Company
at a price of 28.4 pence (“Initial Consideration”).
■
Deferred consideration of £10 for every ounce of gold reserve published (or processed if not included in a reserve) in excess
of 400,000 ounces (subject to a maximum of 1,000,000 ounces, or £6 million).
The vendors retain a 2% net smelter royalty on all gold sales by or on behalf of the Company over and above the first 200,000 ounces
of its production and sales, subject to a maximum of 2.2 million ounces of production and sales.
The consideration above was contingent on a mining license being granted, with the shares held in treasury until such a time.
The mining licence was granted in May 2021.
The Project is a near term development asset in the prolific Siguiri Basin, situated near the town of Kouroussa in the Kouroussa
Prefecture in eastern Republic of Guinea. Kouroussa has a high-grade mineral resource of 1.18 million ounces of gold at over three
grams per tonne. The synergies between the Project and Hummingbird’s existing producing Yanfolila Mine, enable the Company to use
similar metallurgical flow sheet and process plant design to leverage construction and, operational expertise. The addition of Kouroussa
will enable the Company to achieve its next step of becoming a multi-asset gold producer.
The Directors consider the fair value of the consideration paid at the point of acquisition to be:
Fair value of consideration paid
Shares to be issued
Deferred consideration
Professional costs incurred
Working capital adjustment received
Total net consideration
FAIR VALUE
$’000
17,407
5,402
407
(355)
22,861
The deferred consideration is payable of £10 for every ounce of gold reserve published (or processed if not included in a reserve) more
than 400,000 ounces (subject to a maximum of 1,000,000 ounces). In short, any growth in reserves up to a maximum of 1,000,000
results in additional purchase price.
The fair value of the deferred consideration was assessed with the help of a third-party valuer, RFC Ambrian, who have assessed the
likelihood of the growth in reserves and assessed that it is likely that the full £6,000,000 will become payable. An 8% discount factor
was used to determine the present value of these expected cash flows. The potential obligation is classified as financial liability and
included with long term payables.
Professional and other costs of $407,000 were incurred in respect of this asset purchase. These have all been allocated against mine
development asset.
109109
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
The consideration above has been allocated against the assets and liabilities acquired as follows:
Assets and liabilities purchased
Property, plant and equipment – mine development asset
Property, plant and equipment – mine closure
Property, plant and equipment – other at net book value
Intangible assets – net book value
Inventories
Trade and other receivables
Cash and cash equivalents
Provisions
Trade other payables
Other financial liabilities – Smelter Royalty
Total net assets acquired
NET FAIR VALUE
$’000
29,607
350
857
7
177
615
17
(350)
(1,583)
(6,836)
22,861
The assets and liabilities have been recorded in the financial statements areas to which they relate.
24 LIBERIA EARN-IN AGREEMENT
On 4 June 2020 the Company announced an earn-in with ARX Resources Limited (“ARX”) in respect of the Dugbe Gold Project
in Liberia (“Dugbe”). The earn-in agreement requires ARX to complete a Definitive Feasibility Study (“DFS”), carry out a significant
exploration programme and cover all project costs over the 2 year earn-in period (the “Earn-in”). The Earn-in entitles ARX to earn up
to a 49% interest in the Dugbe.
The Earned Interest of 49% is made up as:
a. 39% of the equity securities of Hummingbird Resources Liberia.
b.
all of Hummingbird Resources plc’s economic rights in 5.1% of the equity securities of Hummingbird Resources Liberia held by
Hummingbird Resources plc; and
c.
49% of any loan advanced to Hummingbird Resources Liberia or its subsidiaries by Hummingbird Resources plc and its affiliates.
This was approximately $50.6 million on 30 September 2020.
All the money that ARX spend in Dugbe is non-refundable should they decide not to pursue the earn-in.
On 9 July 2020, Pasofino Gold Limited, a Canadian listed gold exploration company acquired 100% of ARX. ARX has a right to extend
this earn-in agreement for an additional 12 months for payments of $1 million a month.
If ARX/Pasofino completes its conditions above, on being granted the 49 per cent economic interest in the Dugbe, the parties will enter
into a customary joint venture agreement, as well as both having the right, subject to certain protections, to convert the Company’s
51 per cent controlling interest in the Dugbe into a 51 per cent controlling interest in Pasofino or any then listed parent company.
Pasofino have advanced approximately $5,500,000 to Liberia to 31 December 2020, as their work programmes continue. Some of the
key achievements over the year include:
■
■
■
Rehabilitation of infrastructure including camp, roads and other key infrastructure items;
Completion of preliminary PEA outputs in preparation for a full DFS; and
Significant exploration activities across the deposit.
The amounts advanced to Dugbe by Pasofino has initially been netted off against historic E&E spend, and then added back when
spent. This is because despite the spend, this amount was not spent by the Company and therefore no recognition of these
expenditure in the Company’s financial position for the money spend by Pasofino as it is not refundable.
110
110
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES Current spend by Pasofino is reflected as below:
Pasofino Dugbe Spend
Exploration and evaluation assets
Property plant and equipment
Cash on hand at end of year
Total cash advanced
CASH ADVANCED
$’000
ADJUSTMENT
$’000
RECOGNISED IN
FINANCIAL POSITION
$’000
2,717
1,956
886
5,559
(3,603)
(1,956)
–
(5,559)
(886)
–
886
–
The credit of $886,000 will be offset as the remaining cash is spent.
25 SHARE CAPITAL
Authorised share capital
As permitted by the Companies Act 2006, the Company does not have an authorised share capital.
Issued equity share capital
Issued and fully paid
Ordinary shares of £0.01 each
Shares to be issued 1
Ordinary shares to be issued of £0.01 each
Total Ordinary after issue - shares of £0.01 each
2020
2019
NUMBER
$’000
NUMBER
$’000
357,428,368
5,344 354,155,878
5,301
35,248,441
470
–
392,676,809
5,814 354,155,878
–
5,301
The Company has one class of Ordinary shares which carry no right to fixed income.
1
Following the acquisition of Kouroussa Project in Guinea during the year, a total of 35,248,441 new Ordinary Shares in the Company will be issued.
At 1 January 2019
Issue of shares - exercise of options 1
At 31 December 2019
Issue of shares - exercise of options 2
At 31 December 2020
NUMBER OF ORDINARY
SHARES OF £0.01
351,826,899
2,328,979
354,155,878
3,272,490
357,428,368
1
2
On 24 February 2019, 1,861,302 options were exercised in the Company. A further 467,677 options were exercised on 11 November 2019. All options were exercised at £0.01
per share return for £23,000 ($30,000).
A total of 1,831,000 options were exercised in 2020 in the Company at an exercise price of £0.22 per share for a total return of £402,820, generating a share premium of
£384,500 ($488,000). A further 1,441,490 options were exercised in 2020 at an exercise price of £0.01 per share for a total return of £32,700 ($43,000), generating no share
premium.
The total number of outstanding share options are:
Share options
As at 31 December 2019
Issued
Exercised
Lapsed
As at 31 December 2020
Total
15,446,050
9,080,000
(3,272,490)
(5,843,300)
15,410,260
15,410,260
111111
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
26 SHARE BASED PAYMENTS
The following table outlines movement in share options granted and outstanding:
SHARE OPTIONS
Granted 26/10/2010
Granted 5/12/2013
Granted 30/09/2016
Granted 26/09/2017
Granted 30/04/2018
Granted 24/01/2019
Granted 27/02/2020
Granted 16/04/2020
2019
NUMBER
2,960,000
1,904,000
5,148,134
110,795
4,703,129
619,992
–
–
GRANTED
NUMBER
EXERCISED
NUMBER
LAPSED
NUMBER
2020
NUMBER
–
–
–
–
–
–
7,715,000
1,365,000
(1,395,000)
(436,000)
(1,275,567)
–
(165,923)
–
–
–
–
–
–
–
(4,083,300)
–
(830,000)
(930,000)
1,565,000
1,468,000
3,872,567
110,795
453,906
619,992
6,885,000
435,000
Total number of share options
15,446,050
9,080,000
(3,272,490)
(5,843,300) 15,410,260
Weighted average exercise price
£0.08
£0.01
£0.13
£0.01
£0.05
Of the total number of share options outstanding at 31 December 2020, 7,780,310 (2019: 10,122,929) had vested and
were exercisable.
The weighted average fair value of share options granted during the year was $0.269 (£0.2125) (2019: $0.298, (£0.229)).
The weighted average share price (at the date of exercise) of share options exercised during the year was $0.455 (£0.35)
(2019: $0.3 (£0.231)).
The exercise price of share options outstanding at 31 December 2020 ranged between £0.01 and £0.22 (2019: £0.01 and £0.22)
and their weighted average contractual life was 6 years (2019: 6 years).
The following table outlines share based payment charges:
Charge for equity settled share-based payments (HIPPO 2016) *
Charge for equity settled share-based payments (HIPPO 2019)
Charge for equity settled share-based payments (HIPPO 2020)
Charge for cash settled share-based payments (CEO Deferred bonus)
Total share-based payment charges
Total share-based payment charges recognised in profit and loss
2020
$’000
75
108
1,663
310
2,156
2,081
2019
$’000
371
740
–
13
1,124
753
* Included within share-based payments for the year is $75,000 (2019: $371,000) capitalised to mine development assets.
Hummingbird incentive plan – performance orientated (“HIPPO 2016”)
In recognition of the critical importance of delivering the Yanfolila Mine (“the Mine”) on time, on budget, to retain and incentivise key
team members, and to align management and shareholders, the Company granted options to certain group employees and directors
of the Company under the rules of HIPPO, subject to a maximum dilution limit of 20% of issued share capital. On 30 September 2016
and 26 September 2017, the Company granted 7,954,386 and 727,272 share options respectively. Additionally, cash awards were
granted with a total value of $2,450,000 based on a 95% probability of meeting the vesting criteria.
Total award granted
Exercise price of the options
Fair value of the options at the dates of grant
30 Sep 2016
26 Sep 2017
Vesting:
25% – from the first gold pour at the Mine 1
25% – from the passing of completion tests in respect of the Mine 2
25% – 12 months from first gold pour at the Mine 3
25% – 24 months from first gold pour at the Mine 4
Number of shares options exercised or lapsed in prior periods
Number of share options exercised or lapsed during the current period
Number of share options outstanding as at 31 December 2020
SHARE AWARD
8,681,658
£0.01
CASH AWARD
($’000)
2,450
–
$0.312 (£0.24)
$0.446 (£0.33)
2,170,415
2,170,415
2,170,414
2,170,414
(3,422,729)
(1,275,567)
3,983,362
–
–
*
*
*
*
–
–
–
Proportionally in line with vesting conditions and prevailing exchange rates at the date of payment.
*
1 First gold was successfully poured on 17 December 2017, upon which options vested. Cash award paid in December 2017.
2 Completion tests successfully met in June 2018, upon which options vested. Cash award paid July 2018.
3 Options vested 17 December 2018. Cash award paid January 2019.
4 Options vested 19 December 2019. Cash award paid December 2019.
112
112
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES The fair value of both the equity settled share award and cash award was capitalised to mine development assets on a straight-line
basis over the vesting period of the award.
The fair value of equity-settled share options granted was estimated as at the date of grant using the Black-Scholes model, taking into
account the terms and conditions upon which the options were granted. The expected volatility was determined based on the volatility
of similar quoted companies as well as the Company’s own historic volatility from listing on AIM. The table below lists the principal
assumptions and inputs to the model used:
Share price
Expected dividend yield
Expected volatility
Expected life
Risk free interest rate
Resultant fair value
Multiplied by the probability of meeting the vesting conditions at date of grant
DATE OF GRANT
26 SEP 2017
30 SEP 2016
$0.459 (£0.340) $0.324 (£0.249)
Nil
47.78%
3 years
0.164%
$0.312 (£0.24)
95%
Nil
46.52%
2 years
0.447%
$0.446 (£0.33)
95%
Hummingbird incentive plan – performance orientated (“HIPPO 2018”)
The Company announced on 30 April 2018 that it had implemented the Hummingbird Incentive Plan – Performance Orientated 2018
(“HIPPO 2018”) incentive scheme to retain and incentivise key team members to deliver efficient production from Yanfolila in its first year
of operations. The initial grant was for 6,157,819 share options. Additionally, cash awards were granted with a total value of $2,010,000
based on an 80%, 75% and 50% probabilities (respectively) of meeting the vesting criteria. As a result of operational challenges during
2018, no options vested during the performance period 1 April 2018 to 31 December 2018.
In recognition of the critical importance of the recovery plan announced on 29 November 2018 and to retain and incentivise key team
members, on 24 January 2019 the Company amended the targets for the HIPPO 2018 incentive scheme to align these with the
Company’s key objectives for 2019.
The below reflect HIPPO 2018 as at 31 December 2020:
Total award granted 30 April 2019 – original grant
Black scholes revaluation change
Lapsed as part of amendment
Reissued as part of amendment
Total HIPPO 2019 awards granted - as amended
Lapsed/paid out during the prior periods
Lapsed/paid out during the current period
Number of share options outstanding as at 31 December 2020
Exercise price of the options - amended
Fair value of the options at the date of grant -amended
*
Proportionally in line with vesting conditions and prevailing exchange rates at the date of payment.
Performance period 1 January 2019 to 31 December 2019.
SHARE AWARD
6,157,819
–
(234,375)
751,427
6,674,871
(1,351,750)
(4,249,223)
1,073,898
$0.013 (£0.010)
$0.298 (£0.229)
CASH AWARD
($’000) *
2,010
(507)
(231)
9
1,281
(771)
(376)
134
–
–
The Company has the option to defer payment of cash awards until sufficient funds are available or settle in shares.
113113
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
The fair value of equity-settled share options granted was estimated as at the date of grant using the Black-Scholes model, taking into
account the terms and conditions upon which the options were granted. The expected volatility was determined based on the volatility
of similar quoted companies as well as the Company’s own historic volatility from listing on AIM. The table below lists the principal
assumptions and inputs to the model used for options granted:
Share price at the date of amended grant
Expected dividend yield
Expected volatility
Expected life
Risk free interest rate
Resultant fair value
DATE OF GRANT
$0.311 (£0.239)
Nil
45.89%
4.0 years
0.819%
$0.298 (£0.229)
Multiplied by the probability of meeting the vesting conditions at date of grant of 80%, 75% and 50% (respectively).
Hummingbird incentive plan – performance orientated (“HIPPO 2020”)
The Company announced on 27 February 2020 that it had, consistent with prior years, initiated the HIPPO 2020 incentive scheme
to retain and incentivise key team members to deliver on the Company’s strategy.
The Restricted Share Units (“RSUs”) in the form under HIPPO 2020 have been granted over ordinary shares in the Company of £0.01
each (“Shares”) and have an exercise price of £0.01 per Share. Subject to the performance criteria being met for each respective
tranche and continuous employment with positive performance, under normal circumstances, the RSUs shall vest 50% by 31 March
2021, 25% by 31 December 2021 and 25% by 31 December 2022. These were allocated as follows:
a) Production Tranche:
i.
1/9 of the RSUs will vest if 120,000 (or more) ounces of gold are poured between 1 January 2020 and 31 December 2020.
ii.
A further 1/9 of the RSUs will vest if 125,000 (or more) ounces of gold are poured between 1 January 2020 and
31 December 2020.
iii.
A further 1/9 of the RSUs will vest if 130,000 (or more) ounces of gold are poured between 1 January 2020 and
31 December 2020.
b)
Cost and Cashflow Tranche:
i.
1/6 of the RSUs will vest if the Yanfolila AISC (as announced by the Company), as normalised for a US$0.70 / litre fuel price
and a US$1,350 gold price, is equal to or lower than US$850 per ounce sold;
ii.
1/6 of the RSUs will vest if the Company is in a net cash position by 31 December 2020.
c) Performance Tranche:
i.
up to 1/3 of the RSUs may vest based on participant performance against individually set KPIs and the Company’s overall
ESG and safety performance, at the Board’s discretion, following the recommendation of the Remuneration Committee.
Once vested, any RSUs may be exercised during a set exercise period determined by the Company and notified to the option holders.
This is intended to be a minimum of a one-week period per year when the Company is in an “open period” under MAR. Unvested
RSUs will normally lapse on cessation of employment for any reason. The RSUs holders will retain vested RSUs following cessation
of employment and will have two years from the date of cessation of employment to exercise, after which the option shall lapse.
The below reflect HIPPO 2020 as at 31 December 2020:
Total award granted 27 February/16 April 2020 – original grant
Lapsed during year
Number of share options outstanding as at 31 December 2020
*
Proportionally in line with vesting conditions and prevailing exchange rates at the date of payment.
The performance period runs from 1 January 2020 to 31 December 2020.
SHARE AWARD
9,080,000
(1,760,000)
7,320,000
CASH AWARD
($’000) *
2,350
(1,500)
850
The Company has the option to defer payment of cash awards until sufficient funds are available or settle in shares.
114
114
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES
The fair value of equity-settled share options granted was estimated as at the date of grant using the Black-Scholes model, taking into
account the terms and conditions upon which the options were granted. The expected volatility was determined based on the volatility
of similar quoted companies as well as the Company’s own historic volatility from listing on AIM. The table below lists the principal
assumptions and inputs to the model used for options granted:
Share price at the date of amended grant
Expected dividend yield
Expected volatility
Expected life
Risk free interest rate
Resultant fair value
DATE OF GRANT
$0.282 (£0.2125)
Nil
45.96%
4.0 years
0.819%
$0.269 (£0.203)
CEO Deferred bonus
On 1 June 2014, contingent on the successful acquisition by the Company (or a subsidiary of the Company) of the Yanfolila Project
the Company awarded the Chief Executive Officer a deferred bonus in the form of a cash settled share-based payment equivalent
to the cash value on the date of payment of 1,785,714 shares (subject to a maximum share price of £2.016). This bonus is deferred
and except in the event of a change of control, only becomes payable after a vesting period of 2 years and at the earlier of the Chief
Executive Officer ceasing to be a director of the Company or 10 years.
The Yanfolila Project was acquired on 2 July 2014 and accordingly this cash settled share-based payment was granted on that
date. The share price and resultant fair value of this cash settled share-based payment was estimated as at the date of grant as
$0.99 (£0.58) and $1,774,000 (£1,036,000) respectively, which was spread over the vesting period of 2 years and is re-measured at
each reporting date using the share price on that date. The share price as at 31 December 2020 was $0.45 (£0.3325)
(2019: $0.28, £0.2125).
As a result of movement in the share price and changes in foreign exchange rates, the deferred bonus liability was increased by
$310,000 (2019: $13,000).
Founders Equity Alignment Plan (“FEAP”)
On 1 July 2014 the shareholders approved the adoption of a long-term incentive plan for the purpose of retaining and motivating the
executive directors to deliver the proposed new strategy, which was rebased on 21 June 2016 as part of the fundraise to recapitalise
the Company.
Participants in the FEAP are limited to existing executive directors (“executives”). Allocations of the FEAP are proposed by the Principal
Director (currently the CEO) and ratified by the board. As at 31 December 2020 no allocation had been proposed. The FEAP will issue
shares to the participants for adding material long term shareholder value and therefore align the interest of the executives with the
shareholders by providing a strong incentive for the executives to drive shareholder value. The value that may be delivered to executives
and the dilution of shareholders are commensurate with levels applying in schemes implemented by industry comparators.
Under the FEAP, shares may be distributed to participants depending upon the value that has been added to shareholders over the
vesting period. No value will accrue to the FEAP if the growth in shareholder value is less than 50% of the market capitalisation of
Hummingbird on 21 June 2016. If the growth in shareholder value is over 50%, a proportion of value added to shareholders will accrue
to the FEAP, increasing progressively, starting at 5% of the value added to shareholders up to a maximum of 15% of the value added
to shareholders above 150%. Shares with a value equal to the value accrued in the FEAP will be issued on vesting or the value can be
settled in cash at the Company’s option. There is also the flexibility to allow early payments under the FEAP where assets or companies
are disposed of and value has been added exceeding 50% on the same principles.
115115
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
27 NOTES TO THE STATEMENT OF CASH FLOWS
Profit before tax
Adjustments for:
Amortisation and depreciation
Amortisation and depreciation – right of use assets
Share based payments
Finance income
Finance expense
Share of associate loss
Share of joint venture loss
Reversals in impairment of financial assets
Gain on financial assets measured at fair value
Operating cash flows before movements in working capital
Increase in inventory
Increase in receivables
Decrease in payables
Taxation paid
Net cash inflow from operating activities
NOTES
14 & 13
19
26
9
9
12
12
16
12
2020
$’000
26,283
29,200
12,485
2,551
(2,014)
9,288
–
17
(397)
(1,203)
76,210
(2,095)
(1,796)
(4,297)
68,022
(1,766)
66,256
2019
$’000
9,396
28,083
11,012
850
(2,241)
8,278
62
4
(23)
(2,218)
53,203
(4,275)
(121)
(2,438)
46,369
(1,645)
44,724
Cash and cash equivalents (which are presented as a single class of assets on the statement of financial position) comprise cash in
hand, cash at bank and short-term bank deposits with an original maturity of three months or less. The carrying value of these assets is
approximately equal to their fair value.
28 FINANCIAL INSTRUMENTS
In common with all other businesses, the Group and Company are exposed to risks that arise from its use of financial instruments. This
note describes the Group’s and Company’s objectives, policies and processes for managing those risks and the methods used
to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.
Capital
The Company and Group define capital as share capital, unissued share capital, share premium, other reserves and retained earnings.
In managing its capital, the Group’s primary objective is to provide a return to its equity shareholders through capital growth. Going
forward the Group will seek to maintain a gearing ratio that balances risks and returns at an acceptable level and also to maintain a
sufficient funding base to enable the Group to meet its working capital and strategic investment needs. In making decisions to adjust
its capital structure to achieve these aims, either through new share issues or the issue of debt, the Group considers not only its
short-term position but also its long term operational and strategic objectives.
Externally imposed capital requirements
The Group is not subject to externally imposed capital requirements.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement,
and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity
instrument are disclosed in note 3 to the Consolidated Financial Statements.
116
116
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES Principal financial instruments
The principal financial instruments used by the Group from which financial risk arises are as follows:
CATEGORIES OF FINANCIAL
INSTRUMENTS
FINANCIAL ASSETS MEASURED AT
AMORTISED COST
FINANCIAL ASSETS MEASURED AT
FAIR VALUE THROUGH
PROFIT OR LOSS
FINANCIAL LIABILITIES
MEASURED AT
AMORTISED COST
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2020
$’000
2019
$’000
FINANCIAL LIABILITIES AT FAIR
VALUE THROUGH PROFIT OR LOSS
2019
$’000
2020
$’000
Financial assets
Cash and cash equivalents
(note 16)
Investments (note 12)
Other receivables (note 16)
Financial liabilities
Borrowings (note 17)
Lease liabilities (note 19)
Trade payables (note 21)
Other payables (note 21)
Accruals (note 21)
Royalty liability (note 22)
Deferred consideration
(note 23)
11,068
–
10,114
21,182
8,529
–
9,730
18,259
–
7,721
–
7,721
–
6,103
–
6,103
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13,208
13,274
18,687
1,058
13,546
15,000
5,402
80,175
–
–
–
–
40,000
12,594
15,809
910
16,611
15,000
–
100,924
–
–
–
–
–
–
–
–
–
6,836
–
6,836
–
–
–
–
–
–
–
–
–
–
–
–
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies. Whilst retaining
ultimate responsibility for these, the Board has delegated the authority for designing and operating processes that ensure the effective
implementation of the objectives and policies to the Group’s finance function. The Board receives regular reports from the Group’s
finance function through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and
policies set.
The overall objective of the Board is to set policies that seek to reduce risk as far as practical without unduly affecting the Group’s
competitiveness and flexibility. Further details regarding these policies are set out below:
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit
risk arises principally from the Group’s investment in cash, trade and other receivables.
In respect of investments in cash, the Group seeks to deposit funds with reputable financial institutions until such time as it is required.
Impairment of financial assets
The Group’s financial assets that are subject to the expected credit loss model are trade and other receivables.
The Group’s credit risk on the trade receivables is concentrated with its primary customer, a global physical precious metals merchant
with a strong credit rating. The historical level of customer defaults is nil. As a result, the credit risk associated with trade receivables at
December 31, 2020 is considered negligible.
The Croup’s credit risk on other receivables include amounts receivable from the Government of Mali. Having completed a recoverability
assessment on other receivables in accordance with IFRS 9, the Group revaluated the expected credit loss allowance 31 December
2020 (note 16).
The Group’s credit risk management practices and how they relate to the recognition and measurement of expected credit losses is set
out below.
117117
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
Definition of default
The loss allowance on all financial assets is measured by considering the probability of default.
Receivables are considered to be in default when the principal or any interest is more than 75 days past due, based on an assessment
of past payment practices and the likelihood of such overdue amounts being recovered.
Determination of credit-impaired financial assets
The Group considers financial assets to be ‘credit-impaired’ when the following events, have occurred:
■
■
■
■
default or late payments;
significant financial difficulty of the counterparty arising from significant downturns in operating results and/or significant
unavoidable cash requirements when the counterparty has insufficient finance from internal working capital resources, external
funding and/or group support;
observations of default or breach of contract; and
it becoming probable that the counterparty will enter bankruptcy or liquidation.
Where a significant increase in credit risk is identified, the loss allowance is measured based on the risk of a default occurring over
the expected life of the instrument rather than considering only the default events expected within 12 months of the year-end.
Write-off policy
Receivables are written off by the Group when there is no reasonable expectation of recovery, such as when the counterparty is known
to be going bankrupt, or into liquidation or administration.
The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to credit risk.
Lifetime expected credit losses
A reconciliation of the lifetime expected credit losses at 1 January 2020 and 31 December 2020 in accordance with IFRS 9, is set
out below.
As at 1 January 2019
Decrease during the year
As at 31 December 2019 (under IFRS 9)
Decrease during the year
As at 31 December 2020
OTHER
RECEIVABLES
GOVERNMENT OF
MALI
$’000
1,815
(23)
1,792
(397)
1,395
Liquidity risk
Liquidity risk arises from the Group and Company’s management of working capital and the amount of funding committed to its work
programmes. It is the risk that the Group or Company will encounter difficulty in meeting its financial obligations as they fall due.
The Group and Company’s policy is to ensure that sufficient funds will be available to allow it to meet its liabilities as they fall due.
To achieve this, the Board receives cash flow projections as well as information regarding available cash balances on a regular basis.
The Board will not commit to material expenditures prior to being satisfied that sufficient funding is available. The Group’s borrowings
including maturity dates are detailed in note 17.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to
changes in market interest rates. Interest rate risk arises from interest bearing financial assets and liabilities that the Group uses. Interest
bearing assets comprise cash and cash equivalents which are considered to be short-term liquid assets. The Group’s interest-bearing
financial liabilities are at a fixed rate of interest.
118
118
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES Foreign exchange risk and foreign currency risk management
The Group is exposed to foreign exchange risk through certain costs being denominated in currencies other than the functional
currency, and from holding non-functional currency cash balances.
Although the Group has no formal policy in respect of foreign exchange risk, as the majority of the Group’s forecast expenditures are
in United States Dollars, Australian Dollars, Euros, Sterling, South African Rand, Guinea Francs and West Africa CFA Franc, the Group
holds the majority of its funds in these currencies. Currency exposures are monitored on a monthly basis.
The carrying amounts of the Group’s foreign currency denominated financial assets and monetary liabilities at the reporting date are
as follows:
Australian Dollars (“AUD”)
Canadian Dollars (“CAD”)
Euros (“EUR”)
Sterling (“GBP”)
South African Rand (“ZAR”)
Guinea Franc (“GNF”)
West African CFA Franc (“FCFA”)
LIABILITIES
2020
$’000
203
–
396
9,810
106
725
32,360
2019
$’000
–
–
31
5,412
46
–
52,746
ASSETS
2020
$’000
104
74
8,082
1,954
36
151
10,492
2019
$’000
79
77
763
1,461
–
–
14,778
Foreign currency sensitivity analysis
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group
operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily to movements in
the $ against the EUR, GBP, ZAR, GNF and FCFA. The Group ensures it places any excess liquidity in stable currencies to reduce its
exposure to foreign currency risks. Foreign exchange differences on retranslation of monetary assets and liabilities are recorded in the
income statement.
At 31 December, if the $ had weakened/strengthened by 10% against the EUR, GBP, ZAR, GNF and FCFA, with all other variables
held constant, the impact on profit before tax on the non-$ denominated financial assets and liabilities would have been as follows.
A movement of 10% reflects a reasonably possible sensitivity when compared to historical movements over a three to five-year
timeframe. A positive amount in the table reflects a potential net increase in the profit before tax:
Increase in comprehensive income and net assets - EUR
Decrease in comprehensive income and net assets - GBP
Decrease in comprehensive income and net assets - ZAR
Decrease in comprehensive income and net assets - GNF
Decrease in comprehensive income and net assets - FCFA
29 RELATED PARTY TRANSACTIONS
2020
$’000
769
(786)
(7)
(58)
2019
$’000
73
(395)
(12)
–
(2,187)
(3,797)
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
disclosed in this note.
Transactions with Stephen Betts & Sons Limited
During the year Stephen Betts & Sons Limited charged the Company $79,000 (2019: $68,000) under a contract for the provision of
staff, office equipment and warehouse space. There were $20,000 accrued outstanding charges between the parties as at
31 December 2020 (2019: $19,000). Amounts outstanding are unsecured and have been settled in cash.
Additionally, during the year the Company sold Stephen Betts & Sons Limited $3,361,000 (2019: $1,774,000) in gold grain and
investment gold coins at a premium to the spot gold price. There was $345,000 accrued outstanding sales between the parties as at
31 December 2020 (2019: $171,000). Amounts outstanding are unsecured and have been settled in cash.
Stephen Betts & Sons Limited is a related party of the Group because Stephen Betts and Daniel Betts are shareholders and Directors
of the ultimate parent company.
Earn-in Agreement with Pasofino/ARX
As previously announced the Group entered into an earn-in agreement with ARX (which was subsequently acquired by Pasofino),
for the development of Dugbe, Liberia.
119119
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
Three directors of the Company (Daniel Betts, Ernie Nutter and Thomas Hill) invested into ARX in support of their strategy to develop
Dugbe, as well as to demonstrate their personal commitment and long-term belief in the potential of the Dugbe Gold Project as a
result the three directors have an aggregate holding of approximately 17% in Pasofino as of 31 March 2021, which will be diluted in the
normal course as a result of Pasofino’s pending close of their most recent fundraising.
Each of their investments was on the same terms as third parties investing at the time, and the Company’s interaction with Pasofino
was handled by an independent committee of the Hummingbird Board, chaired by the Chairman, and comprising the three other
directors (in addition to the Chairman).
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the
categories specified in IAS 24 Related Party Disclosures.
Short-term employee benefits
Social security cost
Pensions
Share based payment charge
Increase in provision for potential social security costs on share options
2020
$’000
1,298
169
14
1,221
374
3,076
2019
$’000
1,403
153
34
259
52
1,901
30 COMMITMENTS
As at 31 December 2020 the Group had commitments of $2,278,000 (2019: $2,286,000) in respect of the Yanfolila Project and
Kouroussa Project.
31 EVENTS AFTER THE REPORTING DATE
Change of Mining Contractor
On 1 April 2021 Junction Contract Mining (“JCM”) were appointed as mining contractor at the Yanfolila mine. JCM took over the mining
fleet and approximately 90% of the existing employees of AMS allowing a seamless hand over process.
Vested Options under HIPPO 2020
Following the year and the Board approved the following Restricted Share Units (“RSUs”) should vest in line with achieved performance
criteria, once the Company was in an open period (subject to continuous employment).
POSITION
RSUs GRANTED*
RSUs LAPSED**
IMMEDIATE **
AT 31/12/2021
AT 31/12/2022
RSUs ALREADY VESTED, OR TO VEST
Chief Executive Officer
Finance Director
n/a
2,187,500
1,407,500
5,485,000
1,093,750
703,750
4,134,082
546,874
351,874
737,122
273,438
175,938
306,898
756,274
273,438
175,938
306,898
756,274
Total Directors and Employees
9,080,000
5,931,582
1,635,870
NAME
Daniel Betts
Thomas Hill
Other Employees
*
The RSUs under HIPPO 2020 consist of options granted over ordinary shares in the Company of £0.01 each (“Shares”) and have an exercise price of £0.01 per Share.
RSUs vest subject to performance and continuous employment criteria being met.
** These RSUs will lapse / vest as soon as the Company is in an open period.
As a result of HIPPO 2020’s strict performance criteria on production and cost targets, and the Company’s track record of aligning
management and shareholders’ interests, only 35% of the HIPPO 2020 scheme is expected to vest, while the remainder has lapsed.
New incentive structures for 2021
Following a review led by external remuneration advisors of the appropriate balance of short and long of future short and long term
incentives and retention structures for Directors and key employees in light of the Company’s potential development paths, the
Company has adopted a more standard approach of an annual award of a discretionary short term cash based scheme based on both
corporate and personal targets together with an equity based Long Term Incentive Plan (“LTIP”) intended to better align shareholders
with participants to create shareholder value over the medium to long term.
Subject to the performance criteria being met for each respective tranche and continuous employment with positive performance,
under normal circumstances, the RSUs are expected to vest on 28 February 2024 in equal thirds as follows:
a) Retention Tranche: based on continuous employment and subject to malice provisions.
b)
Absolute Total Shareholder Return versus the 5-working day VWAP to 28 February 2021, with 25% vesting for 8% compound
annual growth and 100% vesting for 18% compound annual growth.
c)
Relative Total Shareholder Return against the S&P Commodity Producers Gold Index (CAPs) with 25% vesting for meeting the
index rising on a straight-line basis to 100% for 5% outperformance.
120
120
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES Under the 2021 LTIP the following RSU awards have been approved.
NAME
Daniel Betts
Thomas Hill
Other Employees
Total Directors and Employees
POSITION
Chief Executive Officer
Finance Director
TOTAL NUMBER OF SHARES SUBJECT
TO RSUS* UNDER THE 2021 LTIP
1,597,494
1,026,960
4,871,094
7,495,548
Additionally one off awards have been approved as follows to certain key employees for the purposes of recruitment, retention and
alignment with the long term strategy: 370,370 RSUs vesting on 31 August 2021 subject to continuous employment and a 3 month
subsequent lock in; and 2,500,000 RSUs vesting on 31 May 2024 subject to continuous employment, a minimum share price of
60 pence and then on a sliding scale of 25% vesting on a $300m market capitalisation to 100% on a $500m market capitalisation.
Once vested, any RSUs may be exercised during a set exercise period determined by the Company and notified to the option holders.
This is intended to be a minimum of a one-week period per year when the Company is in an “open period” under MAR. Unvested
RSUs will normally lapse on cessation of employment for any reason. The RSUs holders will retain vested RSUs following cessation
of employment and will have two years from the date of cessation of employment to exercise, after which the option shall lapse.
The RSUs under the 2021 LTIP and one-off awards consist of options granted over ordinary shares in the Company of £0.01 each
(“Shares”) have an exercise price of £0.01 per Share. RSUs vest subject to performance and continuous employment criteria being
met, and will be formally issued as soon as the Company is in an open period.
Non-executive Director Deferred Share Awards
In recognition of the significant experience and the high level of personal commitment of the Non-executive Directors, each
non-executive Director (including the Chairman) will receive an annual deferred share award with a value of £25,000, vesting one year
from award date. These awards must be retained until the individual ceases to hold office. For the year to 31 December 2021, the
awards are as follows:
NAME
Russell King
Attie Roux
Ernie Nutter
Stephen Betts
David Straker-Smith
Total
POSITION
Chairman
Non-executive director
Non-executive director
Non-executive director
Non-executive director
TOTAL NUMBER OF
DEFERRED SHARE AWARDS
116,063
116,063
116,063
116,063
116,063
580,315
Note 1: The Deferred Share Awards will be formally issued as soon as the Company is in an open period.
Note 2: The entitlement to the above Deferred Share Awards shall normally vest on 31 December 2021, subject to the relevant director remaining in office.
Note 3: No shares will be issued until the relevant director ceases to hold office.
Granting of Mining Licences in Guinea
As announced on 20 of May 2021, the Company has been granted the mining licences for the Kouroussa Gold Project in Guinea
by the Government of Guinea, with the following key terms:
a) 15-year, renewable licence term
b) Mine construction to start within one year, from licence grant
c) 5% royalty payable to the Federal Government of Guinea
d) 1% contribution to Local Development Fund
e) 30% tax on profits
The Government has the right to a 15% non-dilutable free carried interest in the share capital of Kouroussa Gold Mine SA (the wholly
owned subsidiary of the Company which owns the Project), with the right to acquire a further 20% participating interest for cash. The
grant triggers the requirement to pay the initial consideration of £10.0 million, which will have been satisfied by issue of shares in the
Company.
121121
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
COMPANY STATEMENT OF FINANCIAL POSITION
For the year ended 31 December 2020
Assets
Non-current assets
Investments
Financial assets at fair value through profit or loss
Property, plant and equipment
Right of use assets
Receivables from subsidiaries
Current assets
Inventory
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Deferred consideration
Lease liabilities
Current liabilities
Trade and other payables
Lease liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Shares to be issued
Retained earnings
Total equity
NOTES
2020
$’000
2019
$’000
38
38
39
43
40
41
41
41
44
43
42
43
45
45
45
110,825
5,981
42
129
37,430
154,407
3,183
5,181
500
8,864
87,848
4,991
168
302
36,740
130,049
2,242
3,724
1,108
7,074
163,271
137,123
5,402
–
5,402
15,282
105
15,387
20,789
–
103
103
6,680
186
6,866
6,969
142,482
130,154
5,344
488
17,407
119,243
142,482
5,301
–
–
124,853
130,154
As permitted by section 408 of the Act, the Company has elected not to present its statement of comprehensive income for the year.
Hummingbird Resources PLC reported a loss for the year ended 31 December 2020 of $6,882,000. The financial statements were
approved by the Board of Directors and authorised for issue on 26 May 2021.
They were signed on its behalf by:
DE Betts
Director
The notes to the Company financial statements form part of these financial statements.
122
122
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 December 2020
Net cash outflow from operating activities
Investing activities
Purchases of property, plant and equipment
Increase in investment in subsidiaries
Decrease in amounts lent to subsidiaries
Purchase of shares in other companies
Interest received
Net cash generated by investing activities
Financing activities
Exercise of share options
Lease interest payments
Lease principal payments
Net cash from/ (used in) financing activities
Net decrease in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
NOTES
47
2020
$’000
2019
$’000
(1,650)
(4,821)
(20)
(75)
1,205
(393)
5
722
532
(25)
(166)
341
(587)
(21)
1,108
500
(22)
–
4,845
(402)
65
4,486
30
(7)
(186)
(163)
(498)
(24)
1,630
1,108
123
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020
Balance at 1 January 2019
Comprehensive loss for year:
Loss for year
Total comprehensive loss for the year
Share based payments
As at 31 December 2019
Comprehensive loss for year:
Loss for year
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Shares to be issued
Total transactions with owners in their capacity as owners
Share based payments
SHARE
CAPITAL
$’000
5,271
–
–
30
5,301
–
–
–
–
43
SHARES TO BE
ISSUED
$’000
SHARE
PREMIUM
$’000
RETAINED
EARNINGS
$’000
TOTAL
$’000
–
–
–
–
–
–
17,407
17,407
–
129,116
134,387
–
–
–
–
–
–
–
–
488
488
(4,685)
(5,431)
422
(4,685)
(5,431)
452
124,853
130,154
(6,882)
(6,882)
–
–
1,272
(6,882)
(6,882)
17,407
17,407
1,803
119,243
142,482
As at 31 December 2020
5,344
17,407
Share capital
The share capital comprises the issued ordinary shares of the Company at par value.
Share premium
The share premium comprises the excess value recognised from the issue of ordinary shares for consideration above par value.
Retained earnings
Retained earnings comprise distributable reserves.
Shares to be issued
The shares to be issued in settling the initial purchase consideration on the Kouroussa Gold Project.
32 BASIS OF PREPARATION
The financial statements have been properly prepared in accordance with International Accounting Standards in conformity with the
requirements of the Companies Act 2006.
33 ADOPTION OF NEW AND REVISED STANDARDS
The financial statements have been drawn up on the basis of accounting policies consistent with those applied in the financial
statements for the year ended 31 December 2019. The following standards have been adopted in the year with no material impact
on the financial statements of the Company.
Amendment to Conceptual Framework
(effective 1 January 2020)
IFRS 3 (Amendment)
(effective 1 January 2020)
Definition of a Business
IFRS 9, IAS 39, IFRS 7 (Amendments)
(effective 1 January 2020)
Interest Rate Benchmark Reform
IFRS 16 Amendments)
(effective 1 June 2020)
COVID-19 Rent Concessions
Definition of Materiality (amendments to IAS 1 and IAS 8)
(effective 1 January 2020)
The following Standards and Interpretations which have not been applied in the financial statements were in issue but not yet effective.
IFRS 17
(effective 1 January 2023)
Insurance contracts
124
HUMMINGBIRD RESOURCES NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2020
34 SIGNIFICANT ACCOUNTING POLICIES
The separate financial statements of the Company are presented as required by the Companies Act 2006 (the “Act”). As permitted by
the Act, the separate financial statements have been prepared in accordance with International Financial Reporting Standards.
The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are the same as
those set out in note 3 to the consolidated financial statements except as noted below.
Investments
Fixed asset investments, except those carried at fair value through profit or loss, including investments in subsidiaries, are stated at cost
and reviewed for impairment if there are any indications that the carrying value may not be recoverable.
35 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The Company’s financial statements, and in particular its investments in and receivables from subsidiaries, are affected by the critical
accounting judgements and key sources of estimation uncertainty in respect of the recoverability of exploration and evaluation assets
which are described in note 4 to the consolidated financial statements.
Recoverability of investment in subsidiaries
Where the majority of the assets of subsidiary undertakings are exploration and evaluation assets and mine development assets,
determining whether an investment in a subsidiary is impaired requires an assessment of whether there are any indicators of impairment
of these underlying exploration and evaluation assets. If there is any indication of potential impairment, an impairment test is required
based on value in use of the asset. This assessment involves judgement as to: (i) the likely future commerciality of each cost pool of
assets; (ii) when such commerciality should be determined, and (iii) the potential future revenues and value in use. The value in use
calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount
rate in order to calculate present value.
As the market capitalisation of the Group was less than the carrying value of the Company’s net assets as at 31 December 2020,
an impairment review was carried out in respect of the carrying values of the investment in subsidiaries as stated in the Company
Statement of Financial Position. As part of the impairment review of the carrying value of the Group’s mine development assets and
exploration and evaluation assets the Directors considered that there was no impairment as at 31 December 2020.
Recoverability of receivables from subsidiaries and impairment of financial assets
Receivables from subsidiaries represent trading balances and interest free amounts advanced to Group companies with no fixed
repayment dates, being amounts due from; Hummingbird Resources (Liberia) Inc, focused on supporting the Group’s Liberia
exploration interests; and Trochilidae Resources Limited, focused on supporting the Group’s wider business, including its Mali
operations. In accordance with IFRS 9 ‘Financial Instruments’, where the counterparty would not be able to repay the loan if
demanded at the reporting date, the Company has made an assessment of expected credit losses.
Having considered multiple scenarios on the manner, timing, quantum and probability of recovery on the receivables, the Company
recognised a lifetime expected credit reversal of $28,000 (2019: credit reversal of $626,000). The allowance for lifetime expected credit
losses assessment requires a significant degree of estimation and judgement.
36 AUDITOR’S REMUNERATION
The auditor’s remuneration for audit and other services is disclosed in note 7 to the consolidated financial statements.
125
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
37 STAFF COSTS
The average monthly number of employees (including directors) was:
Directors
Other employees
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pensions
Charge for share based payments
Charge for potential social security costs related to share based payments
2020
NUMBER
2019
NUMBER
7
10
17
7
11
18
$’000
$’000
3,127
371
86
1,935
470
5,989
2,696
353
82
696
97
3,924
Within wages and salaries, $1,370,000 (2019: $1,403,000) relates to remuneration payable to directors, included within share-based
payments is a net charge of $1,221,000 (2019: $259,000) under cash-settled share based payment scheme payable to directors,
and within pensions is $14,000 (2019: $34,000) relating to pension contributions in respect of directors.
The total remuneration of the highest paid director is $650,000 (2019: $742,000) comprising $643,000 (2019: $724,000) in relation
to wages and salaries including bonuses paid and pension contributions of $7,000 (2019: $18,000).
The number of directors to whom benefits are accruing under defined contribution pension schemes is 2 (2019: 2).
Key management remuneration is disclosed in note 29 to the consolidated financial statements.
38
INVESTMENTS
(a)
Investments and investments in joint ventures and subsidiaries:
Investments in joint ventures
At 31 December 2019
Additions
At 31 December 2020
Investment in subsidiaries 1
At 31 December 2018
Additions
At 31 December 2019
Additions due to asset purchase (note 23)
Additions
At 31 December 2020
Total investments
At 31 December 2019
At 31 December 2020
1
Investment in Subsidiaries
$’000
105
93
198
57,405
30,338
87,743
22,809
75
110,627
87,848
110,825
The Company’s subsidiaries are disclosed in note “Amortisation charge of $240,000 was capitalised into to mine development assets
during the year.” to the consolidated financial statements. The additions in the year include $75,000 (2019: $338,000) in respect of
HIPPO 2016 incentive scheme that have not been recharged to subsidiaries as well as $22,809,000 because of the Kouroussa Project
acquisition. Refer to note 23 of the consolidated financial statements.
126
126
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES (b) Financial assets at fair value through profit or loss:
Opening balance
Reclassification
Additions
Conversion of loans
Accrued interest
Gain/(loss) through profit
or loss
Closing carrying value
CORA GOLD
2020
$’000
619
–
–
–
–
349
968
2019
$’000
–
276
402
–
–
(59)
619
BUNKER HILL
SHARES AND WARRANTS1
BUNKER HILL
CONVERTIBLE LOAN
TOTAL
2020
$’000
2,297
–
300
2,400
–
16
5,013
2019
$’000
–
–
–
100
–
2,197
2,297
2020
$’000
2,075
–
–
(2,400)
115
210
–
2019
$’000
–
1,903
–
(100)
217
55
2,075
2020
$’000
4,991
–
300
–
115
575
5,981
2019
$’000
–
2,179
402
–
217
2,193
4,991
1 Warrants are valued using the Black Scholes model.
Investments - Cora Gold Limited (“Cora”)
In August 2020 the Company sold its warrant option to subscribe for a further 4,730,000 shares at a price of 10 pence per share for a
consideration of $150,000. This warrant was previously regarded as immaterial and not recognised in the financial position and hence
the full sales proceeds has been recognised as other income in the statement of comprehensive income.
The investment in Cora Gold has been deemed to be a level 1 asset under the fair value hierarchy. This instrument has been valued
using publicly quoted share price. The Company recognised a fair value gain of $349,000 (2019: impairment charge of $59,000).
Bunker Hill Mining Corporation – shares, warrants and convertible loans
The Company entered into an arm’s length convertible loan arrangement, with Bunker Hill Mining Corp (“Bunker Hill”), a Canadian
listed exploration and development company, advancing $1,500,000 and $500,000 on 18 June 2018 and 9 August 2018 respectively.
The loan was repayable by 30 June 2020 and attracted interest of 10% p.a. calculated daily from date of advance until repayment or
conversion. The loans and accrued interest were convertible to common shares at CAD$8.50 and CAD$4.50 per share, respectively.
On 28 January 2020, the Company acquired a further 1,392,857 shares in the company for a total consideration of $600,000 at a price
of $0.43 (CAD$0.56) a share, split as conversion of loan of $300,000 due from Bunker Hill as well as cash investment of $300,000.
The loan conversion rights were then extended by one month to 31 July 2020. On 05 October 2020, the Company converted the final
outstanding loan balance of $2,100,00 due from Bunker Hill for 5,572,980 shares at a cost of C$0.5 per share at the of conversion.
As part of this investment the Company also has option to acquire an additional 2,660,000 shares at a cost of CAD$0.59 per share
before 31 December 2025. The investment is carried at fair value through profit and loss.
The shares in Bunker Hill have been deemed to be a level 1 asset under the fair value hierarchy. This instrument has been valued using
publicly quoted share price. The Company regards the warrants to be level 2 asset under the fair value hierarchy. These have been
valued using a combination of quoted prices as well as calculations under the Black Scholes model.
39 PROPERTY, PLANT & EQUIPMENT
Cost
At 31 December 2018
Additions
At 31 December 2019
Additions
At 31 December 2020
Accumulated depreciation
At 1 January 2019
Charge for the year
At 31 December 2019
Charge for the year
At 31 December 2020
Carrying amount
At 31 December 2019
At 31 December 2020
OWNED
$,000
784
22
806
20
826
499
139
638
146
784
168
42
127127
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
40 RECEIVABLES FROM SUBSIDIARIES
Receivables from subsidiaries
Less: Cumulative allowance for expected credit losses
2020
$’000
37,961
(531)
37,430
2019
$’000
37,243
(503)
36,740
Receivables from subsidiaries represent deferred trading balances and amounts advanced to Group companies, in the interest of
supporting long term growth, and are therefore shown within non-current assets. These in include amounts due from; Hummingbird
Resources (Liberia) Inc, focused on supporting the Group’s Liberia exploration interests; and Trochilidae Resources Limited, focused
on supporting the Group’s wider business, including its Mali and Guinea operations. Receivables from subsidiaries are interest free and
repayable on demand. In accordance with IFRS 9 ‘Financial Instruments’, where the counterparty would not be able to repay the loan
if demanded at the reporting date, the Company has made an assessment of expected credit losses.
Having considered multiple scenarios on the manner, timing, quantum and probability of recovery on the receivables, the Company
recognised a lifetime expected credit loss of $28,000 (2019: loss of $626,000). The net cumulating lifetime expected credit loss for the
balance is $531,000 at 31 December 2020 (2019: $503,000). The allowance for lifetime expected credit losses assessment requires a
significant degree of estimation and judgement. Refer to note 48 for a reconciliation of lifetime expected credit losses.
The Directors consider that the carrying amount of the receivables from subsidiaries approximates their fair value.
41 CURRENT ASSETS
Inventory
Finished gold
2020
$’000
3,183
3,183
2019
$’000
2,242
2,242
At 31 December 2020, inventory included a provision of $nil to adjust finished gold to net realisable value (2019: $nil).
Finished gold consist of Single Mine Origin (‘SMO’) gold coins and gold grain, originating from the Yanfolila Gold Mine in Mali. Further
details are set out on the Group’s website.
Trade and other receivables
Other receivables
Prepayments and accrued income
Trade receivables - intercompany
2020
$’000
885
619
3,676
5,181
2019
$’000
486
568
2,670
3,724
Cash and cash equivalents
Cash and cash equivalents as at 31 December 2020 of $500,000 (31 December 2019: $1,108,000) comprise cash and short-term
bank deposits with an original maturity of three months or less. The carrying value of these assets approximates their fair value.
The Company’s principal financial assets are bank balances and cash and receivables from related parties, none of which are past due.
The Directors consider that the carrying amount of receivables from related parties approximates their fair value.
42 CURRENT LIABILITIES
Trade and other payables
Trade payables
Other taxes and social security
VAT
Accruals
Other payables
Trade payables - Intercompany
2020
$’000
1,892
187
423
2,913
501
9,366
15,282
2019
$’000
1,454
432
47
3,018
445
1,284
6,680
The average credit period taken for trade purchases is 69 days (2019: 70 days).
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
128
128
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES 43 LEASES
The Company leases office space with terms of up to five years. Lease payments represent rentals payable by the Company for those
office spaces in the UK. The Company has elected not to recognised right of use assets for lease of low value and/or short-term leases.
(a) Right of use assets
Information about leased assets for which the Company is a lessee is presented below:
Cost
Initial adoption of IFRS 16, at 1 January 2019
Remeasurements
At 31 December 2019
Remeasurements
At 31 December 2020
Depreciation
At 1 January 2019
Charge for the year
At 31 December 2019
Charge for the year
At 31 December 2020
Carrying amount at 31 December 2019
Carrying amount at 31 December 2020
(b) Lease liabilities
Maturity analysis
At the reporting date, the Company had outstanding commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
Within one year
In the second to fifth years inclusive
Greater than five years
Total undiscounted lease liabilities at 31 December
Lease liabilities included in the statement of financial position at 31 December 2020 were:
At 1 January
At adoption of IFRS 16
Remeasurement
Lease liability and interest paid during the year
Interest expense on lease liabilities
At 31 December
Analysed as:
Current
Non-current
At 31 December
2020
$’000
99
–
–
99
2020
$’000
289
–
(18)
(191)
25
105
105
–
105
OFFICES
$’000
477
(2)
475
–
475
–
173
173
173
346
302
129
2019
$’000
186
123
309
2019
$’000
–
477
(2)
(193)
7
289
186
103
289
Amounts recognised in statement of comprehensive income includes depreciation on right of use assets of $173,000 and $25,0000
interest expense on lease liabilities. A total of $191,000 of lease principal and lease interest were also paid during the year and
disclosed within financing activities on the statement of cash flows.
129129
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
44 KOUROUSSA GUINEA ASSET PURCHASE
Asset purchase are disclosed in note 25 to the consolidated financial statements.
45 SHARE CAPITAL
The movements on this item are disclosed in note 25 to the consolidated financial statements.
46 SHARE BASED PAYMENTS
The Company’s share-based payments information is disclosed in note 26 to the consolidated financial statements.
47 NOTES TO THE STATEMENT OF CASH FLOWS
Loss before tax
Adjustments for:
Amortisation and depreciation
Share based payments
Finance income
Finance expense
Impairment/ (reversals) in impairment) of financial assets
Gain on financial assets measured at fair value
Operating cash flows before movements in working capital
(Increase)/decrease in inventories
Increase in receivables
Increase in payables
Net cash outflow from operating activities
2020
$’000
2019
$’000
(6,882)
(4,685)
319
2,405
(509)
101
28
(575)
(5,113)
(941)
(1,456)
5,860
(1,650)
312
793
(246)
86
(626)
(2,193)
(6,559)
1,756
(1,097)
1,079
(4,821)
48 FINANCIAL INSTRUMENTS
The Company’s strategy and financial risk management objectives are described in note 28.
Principal financial instruments
The principal financial instruments used by the Company from which risk arises are as follows:
CATEGORIES OF FINANCIAL
INSTRUMENTS
FINANCIAL ASSETS MEASURED AT
AMORTISED COST
FINANCIAL ASSETS MEASURED AT
FAIR VALUE THROUGH
PROFIT OR LOSS
FINANCIAL LIABILITIES MEASURED
AT
AMORTISED COST
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2020
$’000
2019
$’000
FINANCIAL LIABILITIES AT FAIR
VALUE THROUGH PROFIT OR LOSS
2019
$’000
2020
$’000
Financial assets
Cash and cash equivalents
Other receivables
Investments
Intercompany trade
receivables
Loans due from subsidiaries
Financial liabilities
Trade payables
Other payables
Accruals
Intercompany trade
payables
Deferred consideration
Lease liabilities
500
885
5,981
3,676
37,430
48,472
1,108
486
–
2,670
36,740
41,004
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,991
–
–
4,991
–
–
–
–
–
–
–
–
–
–
–
–
–
1,892
501
2,913
9,366
5,402
105
20,179
–
–
–
–
–
–
1,454
445
3,018
1,284
–
289
6,490
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The risks that the Company is subject to in addition to the Group risks described in note 28 are set out below:
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.
In addition to the risks described in note 28, which affect the Group, the Company is also subject to credit risk on receivables from
subsidiaries.
130
130
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES
Lifetime expected credit losses
A reconciliation of the lifetime expected credit losses at 31 December 2020 in accordance with IFRS 9, is set out below.
As at 1 January 2019 (under IAS 39)
Restated through opening retained earnings
Opening allowance for expected credit losses
Increase / (decrease) during the year
As at 31 December 2019 (under IFRS 9)
Decrease during the year
As at 31 December 2020 (under IFRS 9)
RECEIVABLES FROM SUBSIDIARIES
HUMMINGBIRD RESOURCES
(LIBERIA) INC
$’000
TROCHILIDAE RESOURCES
LIMITED
$’000
–
724
724
33
503
28
531
–
509
509
(137)
–
–
–
TOTAL
$’000
–
1,233
1,233
(104)
503
28
531
The Company applied IFRS 9 ‘Financial Instruments’ for the first time on 1 January 2018. As a result of the adoption, the cumulative
catch-up approach has been applied. Any adjustments arising on transition to IFRS 9 were recognised in opening retained earnings.
Foreign currency exposure and sensitivity analysis
The Company is exposed to foreign exchange risk through certain costs being denominated in currencies other than the functional
currency, and from holding non-functional currency cash balances.
The carrying amounts of the Company’s foreign currency denominated financial assets and monetary liabilities at the reporting date are
as follows:
Australian Dollars (“AUD”)
Canadian Dollars (“CAD”)
Euros (“EUR”)
Sterling (“GBP”)
South African Rand (“ZAR”)
LIABILITIES
2020
$’000
211
–
1
9,773
2
2019
$’000
20
–
–
5,396
16
ASSETS
2020
$’000
9
74
361
1,172
–
2019
$’000
–
74
378
925
–
Foreign currency sensitivity analysis
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company is
exposed to foreign exchange risk arising from various currency exposures, primarily to movements in the $ against the EUR, GBP and
ZAR. The Company ensures it places any excess liquidity in stable currencies to reduce its exposure to foreign currency risks. Foreign
exchange differences on retranslation of monetary assets and liabilities are recorded in the income statement.
At 31 December, if the $ had weakened/strengthened by 10% against the EUR, GBP and ZAR, with all other variables held constant,
the impact on profit before tax on the non-$ denominated financial assets and liabilities would have been as follows. A movement of
10% reflects a reasonably possible sensitivity when compared to historical movements over a three to five-year timeframe. A positive
amount in the table reflects a potential net increase in the profit before tax:
Decrease in comprehensive income and net assets - AUD
Increase in comprehensive income and net assets - CAD
Increase in comprehensive income and net assets - EUR
(Decrease)/increase in comprehensive income and net assets - GBP
Decrease in comprehensive income and net assets – ZAR
2020
$’000
(21)
8
36
(861)
(2)
2019
$’000
(2)
8
38
(447)
(2)
131131
ANNUAL REPORT + ACCOUNTS 2020 FINANCIAL STATEMENTS
49 RELATED PARTIES
The Company has entered into a number of unsecured related party transactions with its subsidiary undertakings. The most significant
transactions carried out between the Company and its subsidiary undertakings are mainly for short and long-term financing. Amounts
owed from these entities are interest free and repayable on demand. The following amounts were outstanding at the reporting date:
AS AT 31 DECEMBER 2019
Trade receivables - Intercompany
Loans due from related parties
Total related party receivables
Trade payables - Intercompany
Total related party payables
AS AT 31 DECEMBER 2020
Trade receivables - Intercompany
Loans due from related parties
Total related party receivables
Trade payables - Intercompany
Total related party payables
HUMMINGBIRD
RESOURCES
(LIBERIA) INC
$’000
TROCHILIDAE
RESOURCES
LIMITED
$’000
SOCIETE DES
MINES DE
KOMANA SA
$’000
379
36,740
37,119
–
–
2,291
–
2,291
1,284
1,284
–
–
–
–
–
HUMMINGBIRD
RESOURCES
(LIBERIA) INC
$’000
TROCHILIDAE
RESOURCES
LIMITED
$’000
SOCIETE DES
MINES DE
KOMANA SA
$’000
373
37,383
37,756
–
–
3,300
36
3,336
9,366
9,366
3
10
13
–
–
During the year, the Company entered into the following related party transactions with its subsidiary undertakings:
YEAR ENDED 31 DECEMBER 2019
Management fees
Recharge of technical fees
Total sales with related parties
YEAR ENDED 31 DECEMBER 2020
Management fees
Recharge of technical fees
Total sales with related parties
HUMMINGBIRD
RESOURCES
(LIBERIA) INC
$’000
TROCHILIDAE
RESOURCES
LIMITED
$’000
SOCIETE DES
MINES DE
KOMANA SA
$’000
90
–
90
3,701
3,588
7,289
–
–
–
HUMMINGBIRD
RESOURCES
(LIBERIA) INC
$’000
TROCHILIDAE
RESOURCES
LIMITED
$’000
SOCIETE DES
MINES DE
KOMANA SA
$’000
68
–
68
1,084
2,889
3,973
–
–
–
TOTAL
$’000
2,670
36,740
39,410
1,284
1,284
TOTAL
$’000
3,676
37,429
41,105
9,366
9,366
TOTAL
$’000
3,791
3,588
7,379
TOTAL
$’000
1,152
2,889
4,401
The Company’s transactions with other related parties and remuneration of key management personnel are disclosed in note 29 to the
consolidated financial statements.
50 EVENTS AFTER THE REPORTING DATE
Events after the reporting date are disclosed in note 31 to the Consolidated Financial Statements.
132
132
HUMMINGBIRD RESOURCESHUMMINGBIRD RESOURCES 133133
ANNUAL REPORT + ACCOUNTS 2020 COMPANY INFORMATION AND ADVISERS
Company Secretary
Thomas Hill
Nominated & Financial Adviser
Strand Hanson Limited
Registered Office & Head Office
49-63 Spencer Street
Hockley
Birmingham
West Midlands
B18 6DE
United Kingdom
Company number
05467327
26 Mount Row
London
W1K 3SQ
United Kingdom
Broker
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
United Kingdom
Auditors
RSM UK Audit LLP
25 Farringdon Street
London
EC4A 4AB
United Kingdom
Solicitors to the Company (UK Law)
Gowlings WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
United Kingdom
Registrars
Link Asset Services
6th Floor
65 Gresham Street
London
EC2V 7NQ
United Kingdom
Bank
Barclays Bank
1 Churchill Place
Canary Wharf
London
E14 5HP
United Kingdom
134
HUMMINGBIRD RESOURCES “THE ROAD IS LONG, WITH MANY A WINDING TURN
THAT LEADS US TO WHERE? AND WHO KNOWS WHEN?
BUT WE’RE STRONG, STRONG ENOUGH TO CARRY ON,
SO ON WE GO……”
Basil de Tent
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